Many real estate investors unfortunately forget to plan for unplanned maintenance expenses, sometimes also referred to as hidden maintenance expenses. As a general rule of thumb you should budget 1% of the value of the rental per year for maintenance, meaning that for every $100,000 you should be budgetting $1,000 in maintenance costs per year for your rental. Some years there may be no maintenance costs and other years you may have to replace a roof. Over time though the general rule of thumb is that if you budget 1% of the value of the rental per year it should cover most of your real estate rental maintenance expenses. If however you have a fixer upper, an older building, etc. then you will most likely need to use a higher percentage.
With that in mind below is a list of the maintenance costs for rental properties that are too often forgotten or neglected because they aren’t very frequent. In no particular order they are:
Roof
For the average real estate investor this is probably the most expensive and easiest to forget because both infrequent and mostly out of sight until something bad happens such as a leak. Most roofs last between 15-20 years and cost about $8000 to replace depending where the property is located. When purchasing a property it’s usually inspected but after that it’s often forgotten for years therefore it’s important to keep track of around when the roof will need to be replaced.
It’s important to regularly check your roof, even if it’s a new roof. It can be for something as the caulking that’s dried out and cracked leaving water get in to roof tiles that have become damage due to animals and so on. Often these are out of sight and as such don’t get noticed until the problem is much worse then it would be if you regularly inspected your roofs. For example a very small leak from dried caulking that could be very easily repaired by replacing the caulking if found early enough could end up with all kinds of water damages which then need extensive repairs. The challenging part is that some tenants won’t notice things like a water leak, or maybe they just don’t care, but either way it can exacerbate the problem which is why it’s much important to regularly inspect the roofs of your rentals.
Windows
Similar to roofs windows need to replaced every 15-25 years. If you pay for the utilities you’ll probably also want to get more efficient windows to reduce your heating and cooling costs. It can make a surprising the cost difference it makes over time. Windows unfortunately can cost a decent amount but thankfully you don’t always need to replace them all at once, sometimes you can replace them in stages. That being said you’ll probably get a better deal the more windows you replace at the same time.
Windows are also another item which you should inspect regularly, at least once a year. You should look for things such as leaks, condensation, and so on. Even simple things such as the caulking around a window can cause a lot of damage if it starts to dry and crack and let water in. If that happens you may have to not only replace the window but also the walls and any other damage the water has caused. An ounce of preventation here again, just like with roofs, is worth a pound of cure.
Furnace
Again similar to your roof and windows, furnaces have to replace every 15-20 years. Thankfully though the cost is generally lower. You can extend the life of your furnace by doing yearly maintenance on it, and often the costs of the yearly maintenance will end up saving you money over the long term because it can significantly increase the lifespan of a furnace.
The main problem with furnaces is that they can fail at any time, and if it’s winter outside you may have some legal obligations as to how quickly the furnace has to be repaired which may entail emergency furnace surfaces and/or higher costs, especially if it happens over holidays like Xmas. And even beyond the legal expectations you probably want to repair it sooner than later if it’s winter to avoid pipes in the property freezing and bursting causing even more damage. Therefore not only is it good to do regular maintenance so that you get a sense of when your furnace is near it’s end, but you can also decide to replace it before it fails completely.
Air conditioner
Air conditioners have a slightly lower lifespan and generally last 10-15 years. Much like furnaces they are also less costly to replace than roofs and windows but they still cost a fair amount. Depending on your location there may also be some laws or expectations as to how long you have to repair the air conditioner therefore it’s also important to inspect it on a regular basis.
Fences
Depending on the type of fence you have the lifespan can vary quite a bit. For example most wooden fences will last 10-15 years whereas a chain-link fence can last 15-20 years. In either case you should include replacing your fence in your maintenance budget. On a positive note fence repairs can generally be delayed if need be assuming the fence isn’t completely broken or an immediate danger to anyone. In other words you may have more flexibity as to when you need to repair a fence depending on the damage then with most of the items on this list.
Appliances
Appliances can and do break down, and these days appliances tend to last less long then their did in the past. No longer is it normal to have an appliance last you 15-20 years, most appliances today have much shorter lifespans today. In addition it’s often more cost effective to replace appliances then to repair them. Appliances is one of the few items their durability has gotten worse over time. On a positive notes appliances tend to be replaced separately (unless you’re doing a renovation or upgrade) and therefore the costs can be spread out over time.
Most appliances cost between $500-$2000 depending on the type of appliance combined with the features it comes with. It’s generally recommended to avoid the lowest price appliances as they tend to have short lifespans but at the same time you probably also want to avoid higher end appliances as they generally aren’t worth it for rentals unless you rent luxury or high end units.
To get the best value out of your appliances it’s good to involve your tenants with their care. For example if the rental includes a clothes washer and dryer then make sure they empty the lint trap regularly. You may not be able to be there but you can educate them and put other measures in place. There may also be some legal expectations in your local area as to what the tenant’s responsibility are towards the appliances so be sure to look those up beforehand and preferably inform the tenant so they know what they need to do and what they are responsible for. Don’t assume that the tenant knows what a lint trap is, be prepared to educate them. Both of you will benefit from this.
Deck
Although this generally does not apply to apartments for most single residence homes, duplexes, and so on, it’s fairly common for properties to have decks. Decks can range from very simple little structures to large structures that take most of the yard, therefore deck costs are highly dependent on the property, type of deck (wood, etc.), and size of the deck. The lifespan of decks varies a lot based on the types of materials used to build the deck, but your average simple deck made of pressure treated wood should last 10-15 years.
Many people try to save money building their own decks since they seem simpler but if you do this make sure you’re aware of all the rules and regulations for decks because if something ever happens and your deck is not up to code you could be legally liable if the tenant or other persons are injured due to the deck not being up to code. Many areas also have different rules based on whether or not the deck is attached to your house, or even how it’s attached, so it’s important to inform yourself yourself beforehand if you plan on building the deck yourself.
Pavement
Most properties will have some kind of pavement, be it a sidewalk, a driveway, stairs leading up to the front door, etc. Pavement generally lasts 10-20 years depending on the quality and how heavily it’s used. The costs vary wildly depending on the amount of pavement your property has. For example a simple one lane asphaly driveway will cost a lot less than a two lane stone paved driveway with all the trimings. Weather conditions greatly affect pavement in that colder areas where water freezes in the winter often cause the pavement to prematurely crack so it’s important to check for cracks and damage on a regular basis and fix them so that they don’t expand, reducing the lifespan of your pavement.
Foundation
House foundations are meant to last years and years but it’s important to regularly inspect them, at least once a year. You want to look for cracks, not just any kind of cracks but specific types of cracks. Cracks are expected and are part of the normal wear and tear due to the forces on the structure. however extensive cracks, cracks that let water , and cracks that in the form of steps should be re-inspected by a professional right away to avoid major issues. Left un-treated foundation issues have the potential to lead to much bigger issues later, costing a lot more. Foundations are one of the few things that can completely destroy a house.
The hard part with foundations is that if there is an issue it can be very costly and most likely it will exceed your 1% budget, so it’s important to get a good inspection before you purchase the property. That being said it’s also why it’s so important to regularly inspect. Bad cracks can not only lead to water causing more water damage but a big enough crack can also let in bugs causing additional expenses. But more importantly a bad crack can weaken the foundation which in turns amplifies the problem and costs. Therefore it’s important to regularly inspect the foundations of your properties and handle foundation issues as soon as possible.
Hot water
Today we see a lot of both hot water tanks and on-demand hot water, and both seem to last anywhere from 10-15 years (on-demand hot water tankless systems are still relatively new so their lifespans aren’t fully known yet). There is however a trend for companies to try to rent out these units to you where they will do the maintenance as part of the rental process. In either case it is important to budget the cost monthly rental fee or the maintenance costs if you own the units.
Plumbing
Although most people don’t worry about their plumbing until something happens the pipes in your house are not designed to last forever, they will eventually wear out. Thankfully in most cases you don’t have to replace all the plumbing in one step unless you’re doing a major renovation, however if your tenant reports a leaky pipe it is a very good idea to fix it as soon as possible to avoid much bigger damages. It may just be a slow leak but you never know, and if something worse happens it could be very costly. Many insurance companies will not cover damages due to a leak that was left unrepaired meaning that if the slow leak becomes a bigger problem you maay not be covered for the damages incurred due to negligence by leaving the leak get worse. There may also be some legal liabilities depending on your local area and the nature of the leak in regards to damages to the tenant’s property if they notified you and you ignored a leaking pipe. Either way it’s a good idea to address leaky pipes and so on right away, water damages tend to escalate in scope and price very quickly.
With plumbing you also have simpler and smaller maintenance costs such as replacing faucets and so on but they are generally fairly affordable in comparison to the other items on this list. In addition they tend to last 10-15 years depending on their quality and usage.
Weather
Yes this is NOT a maintenance issue but you should expect a certain amount of weather damage over time. Insurance may cover part of the damages but they may not, and if they do most likely you will have to cover the deductible (and your insurance payments may increase). Some areas experience a lot more active weather than others, or have much harsher climates, so depending on where your rental properties are located you may need to adjust your budget accordingly.
Conclusion
Viewed together as a group all these items may seem expensive they rarely all occur at the same time. And if you allocate at least 1% of the properties value each year that should help protect you a lot from suddenly having to lay out a large and “unplanned” expense. The key is not to defer a maintenance too long because if you do that it can end up costing you a lot more in the long run.
