How to Budget for Property Maintenance
What is property maintenance?
Property maintenance in rental properties refers to the ongoing tasks and responsibilities associated with keeping a rental property in pristine condition. This is crucial for both the property manager and the resident to ensure a safe and habitable living environment. Property maintenance involves various activities aimed at preserving the property’s value, meeting safety standards, and providing a comfortable space for residents. Here are some key aspects of property maintenance in rental properties:
1: Routine Inspections: Property managers may conduct regular inspections to identify any issues that need attention. This allows for early detection of potential problems before they escalate.
2: Repairs and Fixes: Addressing and fixing issues promptly is essential. This includes repairing plumbing problems, fixing electrical issues, addressing structural concerns, and taking care of any other maintenance-related issues.
3: Landscaping: Maintaining the exterior of the property is important for curb appeal and overall property value. This can involve lawn care, tree and shrub maintenance, and general landscaping.
4: Painting and Cosmetic Repairs: Keeping the property aesthetically pleasing is important for attracting and retaining residents. This may involve repainting, repairing drywall, and addressing any cosmetic issues.
5: Appliance Maintenance: Ensuring that appliances provided with the rental property are in good working condition is crucial. Regular maintenance and timely repairs can extend the lifespan of appliances.
6: Heating, Ventilation, and Air Conditioning (HVAC) Systems: Regular maintenance of HVAC systems is important for both resident comfort and energy efficiency. This may involve changing filters, cleaning ducts, and servicing heating and cooling units.
7: Pest Control: Addressing pest infestations promptly is crucial for maintaining a healthy and habitable living environment. Regular inspections and, if necessary, professional pest control services may be required.
8: Safety Inspections: Property managers are often responsible for ensuring that the property meets safety standards. This includes checking smoke detectors, carbon monoxide detectors, and ensuring that the property complies with local building codes.
9: Communication with Residents: Clear communication between property managers and residents is essential. This includes informing residents about upcoming maintenance activities, providing instructions for access, and addressing any concerns or issues raised by the resident.
Property maintenance is a shared responsibility between the property management company and the residents. While the property management company is responsible for major repairs and maintenance, residents can be required to perform day-to-day care, such as cleaning, landscaping, and minor repairs. If you have any maintenance tasks that you expect your residents to complete such as landscaping, changing air filters, or checking smoke and carbon monoxide detectors, make sure it is clearly outlined in your lease agreement. This holds everyone accountable and can help resolve any disputes in the future. Failing to outline these expectations can lead to an influx of repetitive work orders that bog down your maintenance team with mundane tasks.
Why should I prioritize property maintenance?
Regular property maintenance is crucial to preserving the value of your property, and providing your residents a comfortable place to live. In addition, failing to maintain properties can cause issues with your property investors, and could even lead to legal disputes. Below is a list of some of the most crucial reasons, property maintenance should be your top priority.
1: Resident Satisfaction and Retention: Well-maintained properties contribute to higher resident satisfaction. A property in good condition provides a comfortable and safe living environment, leading to happier and more satisfied residents. Happy residents are more likely to stay longer, reducing turnover and vacancy rates.
2: Property Value Preservation: Regular maintenance helps preserve the value of the property over time. Neglecting maintenance can lead to a decline in property value due to issues like deteriorating infrastructure, outdated appliances, or cosmetic wear and tear.
3: Legal Compliance: Landlords and property managers are often required to meet certain legal and safety standards. Regular maintenance ensures that the property complies with building codes, health and safety regulations, and other legal requirements. Failure to meet these standards can result in fines or legal issues.
4: Prevention of Costly Repairs: Proactive maintenance can prevent minor issues from escalating into major and costly repairs. Regular inspections and addressing problems promptly help identify and fix issues before they become more significant, saving your investors money in the long run.
5: Enhanced Reputation: Property management companies who demonstrate a commitment to property maintenance show responsibility and care for their residents. This positive reputation can lead to word-of-mouth recommendations and attract other responsible residents who are more likely to take good care of the property. These referrals can also help you avoid a high vacancy rate.
In summary, property maintenance is essential for creating a positive and functional living environment, complying with legal requirements, preserving property value, and fostering positive relationships between a property management company and its residents. It is a key component of successful property management.
Ready to provide a better maintenance experience for your residents while fostering positive owner relationships? Schedule a demo to see the New Standard of Property Maintenance.
Consequences of not prioritizing maintenance?
We hope that all property managers understand the importance of prioritizing property maintenance, and the impact a positive maintenance experience can have on their business. But if not, we wanted to share some of the negative consequences that may arise if you are not performing necessary maintenance tasks at your properties. Since maintenance involves the general wellbeing of your property and the residents, there are some pretty severe consequences that can arise if it is not handled with care and expediency.
- Decreased Property Value: Failing to conduct the property maintenance repairs can result in the deterioration of the property’s physical condition. This can lead to a decline in property value over time, impacting your investors potential return on investment.
- Withholding Rent Payments: Depending on the severity of neglect, and your state laws and regulations, renters may have the legal right to withhold rent payments until their maintenance issue is addressed. This can negatively impact your relationship with your resident, and will cause issues with your property investor as they are losing out on income.
- Increased Owner/Investor Churn: Resident satisfaction directly correlates to your owner and investor churn. If you are neglecting property maintenance, you will see a direct impact on your owner churn rate. If property values decline, and residents start leaving your property it will be difficult to keep your property investors.
- Negative Reviews: Failing to address maintenance issues quickly can lead to more negative reviews from your renters. In fact, data shows that if an HVAC repair takes longer than 3 days, you have less than a 1% chance of receiving a positive review from a resident. The more negative reviews you have, the more difficult it will be to fill vacant properties with the right-fit residents.
- Legal Disputes: Failure to perform required maintenance may result in legal consequences. Local housing codes and regulations often require property owners to maintain certain standards of habitability. Neglecting these standards can lead to legal action from residents or even fines.
Costs associated with property maintenance?
The costs associated with property maintenance can vary depending on the type of property, its age, location, time of year, and the specific maintenance needs. However, some common costs associated with property maintenance include:
1: Routine Repairs: These can include fixing leaky faucets, repairing or replacing damaged flooring, addressing minor electrical issues, and other day-to-day maintenance tasks.
2: Appliance Maintenance and Repairs: Costs related to servicing, repairing, or replacing appliances such as refrigerators, ovens, washing machines, and HVAC systems.
3: Plumbing Repairs: Fixing plumbing issues such as leaks, clogs, or pipe repairs.
4: Electrical Repairs: Addressing electrical problems, replacing faulty outlets or switches, and ensuring the electrical system is up to code..
5: Painting and Cosmetic Repairs: Expenses related to repainting interior or exterior surfaces, patching up walls, and addressing other cosmetic issues.
6: Pest Control: Expenses for routine pest control services or addressing infestations.
7: Safety Upgrades: Costs related to ensuring the property complies with safety standards, such as installing or updating smoke detectors, carbon monoxide detectors, and fire extinguishers.
8: Window and Door Repairs: Fixing or replacing damaged windows and doors to maintain security and energy efficiency.
9: Salary for Maintenance Technicians: If you employ internal maintenance technicians you will be paying them a salary, as well as the costs of benefits, PTO, and insurance
10: Labor- Hours for Third-Party Vendors: In addition to the cost of parts and supplies, if you utilize third-party vendors you will have to budget to pay for their labor hours. These can vary based on the type of job, where you’re located, and the demand for a particular vendor.
It’s important for property managers to budget for ongoing maintenance costs and to address issues promptly to prevent them from becoming more significant and costly problems. Regular property inspections can help identify maintenance needs early on, allowing for proactive and cost-effective solutions.
How to budget for maintenance issues?
So now that you understand the importance of maintenance, and the typical costs associated with maintenance, we move to the more difficult part. Paying for maintenance. Coming up with a maintenance budget can be difficult but it is crucial to make sure you have enough money set aside to deal with both routine, and unexpected maintenance expenses.
There are a few different rules you can use to determine how large your property maintenance budget should be:
Rule #1: The Square Footage Formula: The square footage formula states that you should set aside $1 or every square foot of your property to cover maintenane expenses. For example, if your property is 1,200 square feet, you should set aside $1,200 each year to cover maintenance costs.
Rule #2: The 50% Rule: The 50% rule is another way you can calculate your maintenance budget. This rule states that property managers should devote 50% of their monthly rental income to maintenance expenses. For example if you charge $1,500 a month for rent you should set aside $750 each month to cover any maintenance costs.
Rule #3: The 1% Rule: The 1% rule states that property managers should set aside 1% of their total property value for maintenance each year. For example, if your property is valued at $250,000 you should budget $2,500 every year for your property maintenance budget.
This is a good rule to follow because there is a strong correlation between the value of your property and the cost of maintenance. If housing prices go up, the cost of maintenance is likely to also increase.
However, none of these methods are foolproof because unexpected maintenance issues will always arise. But, they can give you a better idea of how much to set aside in your property maintenance budget so you aren’t blindsided.
The best way to calculate your property maintenance budget is to review historical data and track your maintenance expenses.
How to track maintenance expenses?
Tracking property maintenance expenses year over year is important for property owners and managers to assess the overall health and performance of the property, make informed budgetary decisions, and identify trends in maintenance costs. Here’s a step-by-step guide on how to effectively track property maintenance expenses:
1: Establish a System: Create a dedicated system for tracking expenses. This could be a spreadsheet, accounting software, or a specialized property maintenance tool.
2: Create Categories and Subcategories: Break down maintenance expenses into categories and subcategories. Common categories include:
3: Develop an Expense Tracking Form: Develop a standardized expense tracking form. Include fields for:
Date of Expense
Description of the Expense
Category and Subcategory
4: Regular Data Entry: Establish a routine for entering data. Depending on the volume of expenses, this could be done weekly, bi-weekly, or monthly. Consistency is key.
5: Digital Copies of Receipts and Invoices: Maintain digital copies of receipts and invoices. This could be achieved by scanning physical copies or using digital receipts when available.
6: Review and Analysis: Regularly review and analyze the data. Look for trends, anomalies, or areas where costs are increasing. This will help in making informed decisions about budgeting and prioritizing maintenance activities.
7: Year-End Summary: At the end of each year, generate a comprehensive summary of maintenance expenses. This should include total expenses, a breakdown by category, and a year-over-year comparison.
8: Benchmarking: Compare your property’s maintenance expenses with industry benchmarks. This can provide insights into whether your property’s maintenance costs are within reasonable ranges.
By following these steps, you can establish a robust system for tracking property maintenance expenses year over year, enabling you to make informed decisions and ensure the long-term health of your property.
If the process above sounds like a lot of time spent manually tracking and entering data, don’t worry. With Property Meld property managers can easily track their average maintenance spend per unit, average invoice cost, and even look at what they are charged by each of their vendors. All this information is automated and updated so there is no added time commitment. Plus, you can compare data sets to see how costs have changed over time, and even compare your average costs to other property management companies in your area. This can help you create a property maintenance budget without spending hours manually compiling data.
Interested in taking control of your property maintenance budget, and improving your investors return on investment (ROI)? Book a demo with our team of experts to see how we can help!