The goal of owning rental property is to have more money coming in than going out each month. Besides taxes, mortgage payments and insurance, there are other factors to consider when budgeting for rental property ownership. Maintenance cost estimates are critical to creating a realistic budget. Factor in the condition and particular characteristics of your rental property to make solid estimates.
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Evaluate the property as it stands now. Hire professionals to perform inspections to determine the condition of the property. Faulty electrical wiring and broken plumbing are among the most expensive problems to fix. Factor in upfront maintenance costs to make the rental property move-in ready.
Factor in the weather. Does your area get heavy rain that can cause water damage? Are hailstorms fairly common? High winds? Don't forget extremes of heat and cold. Cold climates, for example, require adequate insulation to prevent such things as frozen water pipes.
Look at the outdoor space. Grass, trees and flowers make for a nice landscape, but they cost money to maintain. Factor in the cost of weekly or biweekly pruning and lawn mowing during warm months. Concrete car parks and sidewalks require maintenance as well to prevent and repair cracks.
Research the tenant history. Rental properties in certain areas, such as college towns, experience higher than average turnover rates. Ask the seller for files on all tenants. Property owners spend additional money on advertisements, legal fees, cleanup and repairs each time a tenant breaks a lease or is evicted.
Add up the units. General maintenance tasks such as replacing flooring and painting walls will eventually have to be done in all of the rental units. Even if the work is not done in all units at the same time, the cost is still there over time. Create a plan to distribute such costs over a reasonable time period.
Factor in managerial costs. Many property owners hire managers to take care of day-to-day operations. Managers cost money, but they save owners time. According to All Property Management, most management companies charge a portion of the rent, usually 6 per cent to 12 per cent.
How to Estimate Maintenance Costs for Rental Properties
Tips and warnings
- Rentals Online suggests that property owners consider adding lawn maintenance and garbage removal to the lease as tenant responsibilities.
- Leaky toilets are the most common cause of high water bills.
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