As a rental property owner in Baldwin Park, CA, it’s important to budget for property maintenance, both routine maintenance and larger projects. By planning ahead for these expenses, you can keep your investment property producing consistent cash flow.
What is rental property maintenance?
Rental property maintenance is key to the long-term success of your investment. It includes repairs, painting, landscaping, and other costs.
There are formulas for budgeting for rental property maintenance costs, but you must also factor in the age and condition of the property. Routine inspections can help identify any hidden issues that need to be taken care of.
Why is it essential to budget for property maintenance?
Investing in rental properties can be a great way to generate rental income, but it’s important to plan ahead for rental property maintenance expenses.
For one, small little fixes here and there are inevitable and if you aren’t prepared to pay for them, you could find yourself struggling to make a profit.
It’s also important to anticipate routine maintenance costs to make sure you are factoring them into how much you charge for rent.
You need to make sure that you are charging enough rent to cover your mortgage, taxes, and the cost of rental property repairs and maintenance.
How can you budget for rental property maintenance?
The easiest way to budget for rental property maintenance is to set aside a set amount of money every month. This can help cover the cost of both routine maintenance and unexpected repairs.
By planning ahead, you can maintain positive cash flow even if an unexpected or costly repair pops up.
What are rental property maintenance expenses?
Rental property maintenance expenses are the costs associated with the repair and upkeep of your investment property. Rental property expenses can include the following:
- Appliance maintenance
- Plumbing issues
- Cleaning products
- HVAC filters
- Pest control services
- Replacing flooring
- Seasonal maintenance
What is the average rental property maintenance expense?
On average, you can expect to spend between $500 and $3000 per year on maintenance for your rental property. Naturally, this number can vary depending on the age and condition of your investment property.
One-time repairs that aren’t included in your monthly expenses are considered capital expenses. These can be expensive, so it’s important to budget for them ahead of time to avoid cash flow problems later on.
As a rule of thumb, CapEx expenses for each unit should be budgeted between $250 and $500 annually. For example, if you own 10 units, you would set aside $2,500 to $5,000 a year. CapEx refers to the funds set aside each year for more expensive repairs, replacements, and improvements.
Are rental property repairs tax-deductible?
You can often deduct repair and maintenance expenses from your taxes. This can include painting the exterior of a rental property, which is usually considered a repair expense. However, it’s important to keep in mind that upgrades and added amenities are not typically deductible.
Before you begin any repairs or maintenance on your home, consult with your accountant or tax advisor. They can let you know what expenses may be eligible for deductions on your taxes.
Who is responsible for rental maintenance?
It is important to know who is responsible for maintenance and repairs when renting out property. According to most lease agreements, tenants are only liable for damages they cause beyond normal wear and tear.
As a landlord, you are responsible for keeping your rental property in good condition. Prompt repairs and regular maintenance are key to keeping tenants happy and keeping them long-term. In some cases, failing to make certain repairs that affect the health and safety of tenants can end up in a loss of rental income.
How do landlords estimate property maintenance costs?
There is no one-size-fits-all answer when it comes to creating a budget for your property. However, there are some methods that property owners often use to estimate annual maintenance costs.
One way to get an accurate estimate is to use what is called the “50% rule.” This rule states that, typically, repairs and maintenance will cost approximately half of what your monthly rent costs. So, for example, if your unit rents for $1000 per month, you can expect to spend around $500 each year on repairs and maintenance.
Square Footage Formula
Another way to estimate yearly rental repairs and maintenance costs is by using the square footage formula. According to this formula, each year you can expect repairs to cost approximately $0.50 per square foot of living space. So, for example, a unit that is 1000 square feet in size would cost around $500 annually in repairs and maintenance.
Rental property maintenance costs can also be estimated using what is called the “one percent rule.” This rule estimates that repairs and maintenance on a home will cost approximately one percent of its total value every year. So, for example, owners of a home valued at $100,000 can expect to spend around $1,000 annually on repairs and maintenance.
These are simple guidelines to help establish a rental property maintenance budget. But, no matter which method you use to estimate repairs and maintenance costs, creating and funding a budget for them is crucial to your success.
How can you reduce rental property maintenance expenses?
On top of budgeting for rental property maintenance expenses, there are also ways to reduce how much you spend on them.
- High-quality materials: Paying a little extra for high-quality materials can save you money in the long run.
- Professional property management: A good Baldwin Park property manager will handle repairs quickly and efficiently
- Stay on top of repairs: A property manager will also catch needed repairs before they become costly problems.
- Routine property inspections: A trained eye will be able to notice small things that could become bigger issues.
Being a successful rental property owner includes taking care of your valuable assets. You must be proactive about setting a budget for rental property maintenance costs and take care of repairs quickly.
Need help budgeting for rental property maintenance expenses?
Even with the perfect formula for setting a rental property maintenance budget, there are still myriad variables that need to be considered.
As Baldwin Park’s full-service management company, Lotus Property Services can help you decide on how much to budget, along with deciding on how much rent to charge. We can then fully manage your property, including rental property inspections and prompt, cost-effective repairs.
Working with the best Baldwin Park property management company will ensure you enjoy profits for decades to come.