How to Manage a Rental Property Maintenance Budget

Your rental property has been a steady earner, and you're excited about the possibility of even more passive income. In addition, you've secured excellent residents who pay on time and are easy to communicate with. 

Then boom, out of nowhere, a big storm hits, and the entire roof needs reshingling.

Do you have a rental property maintenance budget to cover the costs? Property maintenance is one of the critical duties of property owners. Therefore, this blog looks at strategies to prepare an appropriate budget, budgeting tips, and a stress-free way to manage your budget and property.

Budgeting Best Practices for Rental Property Owners 

A property owner must not only consider financial interest in the short term but also ensure the property appreciates over time for long-term gain. 

Use the following steps as a guide to help with your budgeting process. 

Remember That Every Property Is Unique 

While there's a wide range of rules, calculators, and strategies to determine a reasonable budget for maintenance and rental upkeep, every property is unique and requires a customized budget. A one-budget-fits-all can leave you with income losses and not enough cash flow. 

Use a general rule of thumb (such as the 1% Rule discussed below), then adapt it to your specific circumstance or each property. 

Some factors to consider include: 

• Age of the property
• Location and weather (storms, strong winds) 
• General exposure
• Property size 
• Materials used in construction
• Number of renters 

With a clearly-defined budget for each property, you reduce the risk of not having crucial maintenance funds for one property in your portfolio!

Ensure Your Budget Covers ROI Goals 

When determining your ideal ROI (profitability of your investment), factor all maintenance and ongoing costs into the equation. 

Variables such as maintenance costs and unexpected maintenance emergencies may impact your ROI, and you may have to set it slightly lower than first planned.

Factor in Common Maintenance Costs

General wear and tear is part and parcel of being a real estate investor. Therefore, thoroughly understanding these implied costs will ensure your budget is appropriate and accurate. 

Some standard maintenance costs may include: 

• Cleaning
• Flooring
• Landscaping
• General repairs (broken doors, light bulbs, etc.)
• Water leaks
• Replacing air filters 
• Pest control

These costs are relatively routine and differ from emergency maintenance costs (which should also be part of your budget). For example, a suddenly collapsed roof would be considered an emergency maintenance cost. 

Partner With Trusted Vendors 

Choosing trusted contractors will significantly improve your budgeting process. When deciding on a contractor, focus on the quality of services through referrals, reviews, and online research and pricing by comparing with competitors in the space. 

However, remember that hiring contractors can be lengthy and sometimes risky. There are generally three different ways you hire contractors: 

1. Hiring through your private network 
2. Hiring through a third-party contractor
3. Working with a property manager 

Working with a property manager will likely have the best outcome of the three options. This is because property management companies are not only experienced in the space but have intimate knowledge of your property if they've been working with it for some time. 

For example, if you partner with Lexington property management group CHARLESGATE, you'll get access to a team of trusted vendors from the local area. 

Follow Routine Maintenance to Prevent Costly Repairs 

Just like the old medical saying goes, 'prevention is the best cure,' so does this ring true in property maintenance. Following routine maintenance best practices prevents costly repairs and creates a better living space for residents. 

Some regular maintenance tips include:

• Checking for issues following significant weather events (like leaks after storms)
• Replacing smoke detectors on a schedule
• Landscaping and gutter clearing
• Checking HVAC systems (especially during hotter months)
• Checking for signs of pests
• Responding to resident requests quickly 

Always avoid DIY solutions and use trusted vendors to ensure outstanding maintenance jobs are completed to the highest standard. 

Work With an Accountant 

Along with maintaining a rental property budget spreadsheet, the peace of mind and security of working with a professional accountant cannot be matched. An accountant will track all expenses and keep receipts, helping you build a 'database' of costs over time to reflect a more accurate budget. 

How To Estimate Maintenance Costs 

Here are two simple ways to estimate maintenance costs on your investment rental. 

1. The 1% formula: Reserve one percent of the property's value for maintenance costs. 
2. The Square Footage Formula: For every square foot of space, set aside $1 to cover maintenance costs. So, for example, a 1,000-square-foot property will require $1,000 per year to cover maintenance. 

If you're not sure which formula is most accurate for your rental property maintenance budgets, consult a property manager!

A Property Manager Can Help 

Hiring a property manager is one of the easiest ways to manage investment property and budgets. 

To assist in this process, set limits with your property management group about decision-making protocols (the level of maintenance and repairs they can handle) without owner approval. In addition, meet regularly to stay on top of routine matters such as maintenance budget, ROI goals, and more. 

Create a Rental Property Maintenance Budget For Success

A rental property maintenance budget is integral for covering costs related to your investment property, maintaining positive relationships with residents, and ensuring your investment appreciates over time. 

CHARLESGATE has years of experience dealing with maintenance issues and helping owners budget effectively. Reach out to learn how our expertise and strategies will ensure you remain profitable and prepared for maintenance issues.