Performing maintenance and repairs are a big part of owning residential investment property, and several myths about the right way to handle them have pervaded the rental industry for years, misleading owners and causing unnecessary problems. While maintenance and repairs are inevitable, they do not have to be nightmares. So, let’s clear up some of the most common rental property maintenance myths:
Rental Property Maintenance Myth #1: Do-it-Yourself Repairs Always Save Money
Being able to take care of your own repairs comes in handy and can be a great way to save a few bucks when managing a rental property. If you’re a skilled handyman and can handle small repairs, basic plumbing tasks or appliance fixes, by all means, hold off on calling a local tradesman.
However, from the wisdom of Kenny Rogers, “You’ve got to know when to hold ‘em, know when to fold ‘em.” Rumor has it that Kenny wrote this song based on his experience watching his carpenter father selectively turn down jobs (ok, only part of that factoid may be true …). But the counsel still stands; even the best DIY jack- (or jill-) of-all-trades knows when to leave repairs to the pros.
Oftentimes, even if you can handle the rental property repair job yourself, does not mean you should. How much is your time worth? Even if you have the time and energy to take care of the repair yourself, often it makes financial and practical sense to let a dedicated professional handle the job. Even the most capable DIY landlords will find themselves in over their head if they try to handle every job.
Additionally, tenants do not care if you are saving money by doing it yourself. If you cannot confidently complete the job quickly, conveniently and correctly, you owe it to the tenant and yourself to find a qualified technician. Of the things within your control, one of the leading causes cited by tenants for leaving a rental property when the lease is up is poor maintenance. The money you might save doing it yourself is often just a delayed (and greater) loss. The same can typically be said about the cost of hiring a full-time property manager. Sometimes it’s just a convenience, but many times the cost of hiring a professional property manager makes the most long-term financial sense as well.
Rental Property Maintenance Myth #2: Tenants are Responsible for Maintenance and Repairs
Minus a few small exceptions, such as smoke detector battery and light bulb replacement, maintenance and repairs are the landlord’s responsibility. Yes, if the tenant throws a baseball through a window, they are responsible – financially. But even then, the landlord should be notified and handle the repair, working with the tenant for the funds, or deducting from a security deposit. But when an appliance breaks down during the tenant’s stay, it’s typically the result of years of normal wear-and-tear, in which case the landlord is responsible for the repair or replacement.
Even preventative and regular maintenance tasks that traditionally are left to residents may be better handled by the landlord or property manager. For example, just because your tenants are capable of regularly replacing smoke detector batteries and HVAC filters, does not mean they will remember to do so. If you are not replacing these items during a regularly scheduled inspection, providing new batteries and filters at regular intervals will encourage your residents to do so.
Also, do not forget outside. Trees grow, gutters accumulate debris, faucets and sprinkler systems leak, and bees build hives. Keep an eye out for small problems to nip in the bud now, as well as to prevent potential future issues.
Rental Property Maintenance Myth #3: Replacing vs Repairing
This particular property management myth goes both ways. On one extreme, is the optimist who insists that anything can be repaired, including the avocado-colored refrigerator that never gave them any problems. On the other end of the spectrum, is the argument that it’s always cheaper to replace than to repair; disposable appliances are the new norm because “they just don’t make them like they used to.”
Neither extreme is accurate, and deciding between repairing or replacing a broken appliance depends on several factors. Before you fix in a frenzy OR rush to replace, you should consider the age and condition, the expected lifetime, previous fixes and safety concerns (not to mention evaluating what is specifically wrong, if possible). The general rule is if an appliance is older than half of its expected lifespan, and the cost of the repair is over half the cost of replacing (note, not necessarily half the original cost – there is a difference), then you should replace rather than repair.
It is also very important to consider the impact, implications and impression on your tenants. Consider the repercussions of repairing – losing a good tenant because the repair took too long, took multiple repair calls and broke again a month later. An ounce of prevention is worth a pound of cure … but a pound of cure trumps seventeen individual ounces of repair.
Rental Property Maintenance Myth #4: Estimating Rental Property Maintenance Costs
Have you heard of estimating how much money you’ll need to set aside for maintenance on a residential investment property? Listed below are a few choice formulas for your estimating purposes. Which formula is your favorite?
- 50% Rule: Total operating costs (repairs, maintenance, taxes, insurance) will equal half of your rental property income. If your property rents for $1,200/month, $600 should go to keeping the property up and running.
- 1% Rule: Annual maintenance costs will be about one percent of the property value. A property valued at $190,000 should cost $1,900 a year to maintain (or $160 a month).
- Square Footage Formula: Plan on $1 per square foot for yearly maintenance costs. A 2,200 foot rental should cost roughly $2,200 a year to maintain.
- 5x Rule: Maintenance costs will average 1.5 times the monthly rental rate. If your home rents for $1,200, then you should anticipate spending approximately $1,800 a year on repairs.
- Murphy’s Law: Anything that can go wrong, will go wrong
While it’s nice to have a rough guess on how much money you should plan for property maintenance, there are just too many variables to accurately estimate the right amount year in and year out. Use whatever formula you prefer to predict your cost, but know costs can vary widely from year to year.
Rental Property Maintenance Myth #5: What Security Deposits Cover
Security deposits are a common cause of contention between tenants and landlords. Most of the time, disagreement arises due to a lack of communication and/or correct understanding of what the security deposit may be used to cover. There are two common myths related to security deposits:
- Tenant Misunderstanding: The security deposit is for the last month’s rent, right?
Wrong. While many landlords ask for a security deposit that equals a month’s rent, that does not mean those funds are earmarked for the last month’s rent. Unless the tenant and landlord specifically work this out together beforehand in writing, the last month’s rent is expected to be paid in full, and the security deposit will be handled separately. Even if the security deposit is to be returned in full, it should not stand in for the last month’s rent.
- Landlord Misunderstanding: the security deposit can be used for any make-ready, between vacancy repairs and cleaning costs.
Wrong again. The security deposit is intended to cover needed repairs or cleaning costs that result from more than normal wear and tear – not rent. Some landlords intentionally stretch this rule; others do so out of ignorance. Regardless, the security deposit should not be used to replace 15-year-old countertops or to paint the home after 7 years. Unless the tenants cause severe damage by their intentional or negligent behavior, these standard wear-and-tear chores are NOT to be paid for with the security deposit.
Proper handing of maintenance issues should not be taken lightly. If you have questions or need assistance with residential investment property located in Austin, Cedar Park, Round Rock, Pflugerville, Leander, Georgetown or anywhere in Hays, Travis or Williamson Counties, contact Real Property Management Advisors to learn how we can help.
This content is provided for general informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. Readers should consult with licensed professionals regarding their specific circumstances.
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