Every rental owner knows the maintenance expenses in their rentals can eat up any profit from rents. It can be tempting to avoid some expenses to retain profitability. When deferring expenses your actions could have negative consequences with your tenants. Tenants usually get to vote once a year on whether they like the way the home they live in is maintained. When they vote NO, the loss of rent during vacancy may far exceed the cost of the maintenance expenses.
There is a fine line between controlling maintenance expenses and keeping the tenants happy living there. Jacob, one of our owners, and I were meeting and he asked me what ideas I had to allow him to manage his monthly cost for maintenance? He was not asking how to avoid these expenses, just rather how can he plan for them better?
As a result of that meeting, I want to share the following five easy ways to control maintenance expenses.
It is a proven fact. Simple preventative maintenance will limit an owner's exposure to much larger costs. Prevention significantly mitigates the possibility of an emergency situation that also costs many times more. Spending money to make repairs at the first sign of a problem often reduces the long-term cost of ignoring the issue.
One example of how prevention really works involves what I practice on my own properties. We pay for a twice annual service plan on the HVAC system. The preventative maintenance catches potential problems before a failure, and also gives us priority if there is a problem. A small amount spent up front in prevention can go a long way toward potential savings.
Another example of spending a little more to save in the long run involves paint. If your rental needs regular paint on the exterior, there are paint solutions that have lives that far exceed normal paint. They work also! It is so nice to not have to worry about the exterior paint on a rental. An extra bonus is that the siding is protected. The siding will not need repairs or replacements for a much longer period of time.
People give up on some equipment in their homes for reasons as simple as they do not like the way a button operates. These appliances end up with vendors who refurbish, test, and then offer warranties on their performance. They are available for purchase for 50% or more of the new price.
Learn who are these vendors. When a piece of equipment in one of your homes is looking beat up or aged, go ahead and bite the bullet with a used item. Your tenants will be pleased and they wont know the difference. And you will save the higher costs you might be forced to pay when the existing unit fails.
Depending on the kind of home, it may be on the tenants to maintain the exterior. Many of these tenants had no plans to maintain the exterior and when they discover it is their responsibility, they do not do a good job.
What if you offer tenants to pay a fee for their required maintenance? The charge will likely be lower than they could hire the work to be done, but enough to cover making sure your exterior stays looking nice. The benefits of keeping your property looking nice can range from long-term not having to replace an entire yard, to avoiding local citations and fines due to an unkept exterior of your rental.
How often are you getting inside your property to look for maintenance items? So, you think the tenants will just let you know when there is an issue? I hate to tell you this but I have seen tenants completely ignore problems like water on a wall until there is mold all over the interior and exterior of the wall and the residents are ill from the mold in the home!
If you are depending on your tenants to let you know, you can likely control your maintenance expenses by actually having a look also. Or, hire a property manager who can serve as your boots on the ground to sniff out potential issues your tenants are overlooking.
So, this one is more a cash flow hack than an actual savings. This list is on "controlling" maintenance expenses...and control may mean better "management" of the expenses. Rental maintenance expenses can be one of the hardest expenses for which to budget. The amounts can vary significantly month to month.
What if an owner reviews their average annual maintenance expenses on their property and adds to the reserve 1/12 of that amount every month? This could simply be an adjustment from their distributions. If the reserve account was considered as part of the management tool for the property, the accumulation of funds might exceed the unplanned contributions needed to resolve maintenance issues. Essentially this is a forced savings plan.
Controlling and managing maintenance expenses are a part of the property management experience. The unexpected maintenance charges are what ruin the return on a rental property that on paper should be providing a positive cash flow. Then there are the tenants who are the source of the revenue in the asset. We believe anything that can make the tenants experience better is worth considering. If these options help an owner take better care of a tenant, then they are worth adding for a positive, active management plan.
WILMOTH Group is headquartered in Indianapolis and Fort Myers, Fla. WILMOTH Group focuses on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Indianapolis, and short-term management services in Tampa and Fort Myers.
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