Planning Ahead Can Save Money and a Lot of Stress!

By Sue Richey

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Planning for rental property repairs is essential to maintaining a profitable investment. While some years may bring minimal maintenance, others can require huge expenses. However, a smart budget helps prevent financial surprises and ensures a rental stays in top shape. Here’s everything you need to know, including the factors you need to consider for your property budget and how to save money on repairs:

The 1% rule. A common guideline for budgeting repairs is the 1% rule. This suggests setting aside 1% of the property’s total value annually for maintenance and repairs. For example, if a rental is worth $300,000, the recommended repair budget would be $3,000 per year. However, several factors can increase or decrease this number.

Factors to consider for your property budget:

1. Age of the property. Older properties often require more repairs. Aging plumbing, roofs, and electrical systems can lead to higher maintenance costs, especially for homes over 20 years old. If major systems have been updated, expenses may be lower, but it’s always better to budget extra funds for unexpected issues.

2. Tenant wear and tear. Every tenant will contribute to wear and tear, but some will cause more than others. A single professional who travels often may leave a property in near-pristine condition. Meanwhile, a family with children and pets may result in more frequent maintenance needs. Understanding tenant impact helps in planning for turnover repairs.

3. Location and weather. Climate has a big impact on repair costs. Homes in areas with heavy snow, hurricanes, or intense heat face more wear on roofs, HVAC systems, and exteriors. Setting aside extra funds for these conditions can help you avoid expensive surprises.

4. Quality of materials. Some homes have low-quality materials. If past owners used cheap fixtures or did quick fixes, you may need to spend more on upgrades. Weak materials wear out fast and cost more over time. A good inspection can help you see what needs fixing.

How to save money on repairs:

1. Regular maintenance. Preventative maintenance reduces major repair costs. Routine tasks like changing HVAC filters, cleaning gutters, and inspecting plumbing can prevent expensive problems. Whether done personally or through a contractor, staying on top of maintenance keeps repair bills lower.

2. Emergency fund. Setting aside 3 to 6 months’ worth of expenses for unexpected repairs is a smart financial move. Major issues like a failing HVAC system or roof replacement can be costly, and having a financial cushion prevents stress and financial strain.

3. Get the right insurance. A solid landlord insurance policy covers damages from storms, fires, and tenant-related incidents. Additionally, ensuring tenants have renters insurance adds an extra layer of protection. The right coverage prevents out-of-pocket expenses for unexpected damages.

Planning for repairs is key to protecting your rental income. While costs can vary from year to year, a solid budget and proactive maintenance can keep expenses manageable. Setting aside funds and staying ahead of issues will help you avoid financial surprises and keep your property in great shape. You can call me at 703-405-5119 or send an email to sue@richeypm.com. I look forward to hearing from you.