Ask Gerald: How Much Should I Budget for Property Maintenance Costs?
Q: I’ve been looking at rental properties to buy, I’m trying to budget my expenses and want to know how much it really cost to maintain a rental property? Carol, Tempe, Arizona
A: That’s a great question, Carol. There are lots of factors that affect property maintenance costs. The condition of the property will influence the maintenance costs the property generates—so, newly built or newly renovated properties typically have lower maintenance costs than properties that haven’t been updated or renovated for a while. But I understand, before you actually own a property, it’s hard to know what assumptions to use to try to anticipate maintenance costs. I’ve owned many properties over my career as a RE investor and there are periods of time when you don’t have any maintenance costs and other times when it seems like every month you’re paying to fix something. To answer your question, a good rule of thumb to estimate maintenance costs for rental properties is 10% of total rents collected-you can calculate that on a monthly or yearly basis. But remember, you need a reserve account for unexpected expenses, so just because you don’t have any for a particular period of time, you want to put that money aside so that it’s there for you when you need it. Thanks for your question, Carol. For more real estate tips and for information on my real estate coaching program, visit performanceproperty.com. I’m Gerald Lucas and I’ll see you again soon.