How to Manage a Rental Property Maintenance Budget

5 Best Practices for Managing Rental Property Budgets

There is no one-budget-fits-all budget scenario for rental properties. Every property has its own rental property maintenance budget to set and manage individually. 

Keep these five things in mind when considering and maintaining a rental property budget:

1. Your maintenance budget must help you achieve the ROI set for each property.
2. Identify and include common maintenance costs when setting your property's budget.
3. Select reliable vendors that deliver quality service at reasonable prices.
4. Mitigate costly repairs by scheduling routine property checks and maintenance.
5. Keep accurate accounts of all expenses and receipts. Working with an accountant can significantly improve the accuracy and efficiency of this aspect.

With these tips in mind, property owners must accurately estimate expenses for repairs and maintenance! 

Understanding Rental Property Maintenance Expenses

So, how can property owners accurately set a budget? In addition to routine costs, it's crucial to be prepared for unforeseen expenses. To this end, set aside a portion of the monthly rental income for maintenance issues, upgrades, and emergencies. 

If you are new to the rental property game, a property manager can help you estimate pricing for common repairs and determine an amount to set aside each month to build cash reserves for emergencies. 

How to Estimate Maintenance Costs Per Property

Maintenance costs are likely to differ from month to month. However, property management companies recommend budgeting a specific portion of each month's income for maintenance expenses. There are two primary ways to estimate the maintenance costs of a rental property:

1. The 1% Formula

The one percent formula says a property owner should set aside 1% of the property's value per year toward maintenance costs. In other words, if a property is valued at $175,000, the annual maintenance budget should be about $1,750. While this can be a good starting place, work with property managers to determine if that's realistic for your property in Newport News. 

2. The Square Footage Formula

The square footage formula uses the property's surface area as a guide for estimating annual maintenance costs. With this method, owners should budget at least $1.00 per square foot of space annually. Therefore, a 1,200-square-foot home could cost about $1,200 for basic maintenance each year.

These formulas provide a guideline for setting budgets. Other factors to consider are the age of the home and the state of repair (or disrepair). A brand-new home should require less maintenance than a decades-old rental unit. Remember: set aside some cash over and above the annual estimated maintenance costs when setting up your budget. Save up an amount of 3-6 months' maintenance expenses for unexpected substantial repairs or tenant vacancies.

Rental Property Maintenance Expenses: Different Types

What types of maintenance fall within your estimated costs? Create a rental property budget spreadsheet to calculate the different costs for specific routine tasks. Breaking these tasks or potential repairs down into different categories may help to plan more accurately. Budget categories can include: 

• Emergency maintenance. Don't forget a budget line item for when unforeseen things happen, such as a gas leak or a water pipe bursting.
• Preventative maintenance. Routine maintenance for a rental property, such as the HVAC system, is essential to help avoid expensive emergency repairs.
• Appliance maintenance. Appliances are expensive to replace when they break down. Regular maintenance could help to circumvent premature breakdowns due to tenant negligence.
• Seasonal maintenance. Seasonal maintenance points to consider are keeping the gutters clean, winterizing pipes, or checking the roof for leaks twice a year. 

Creating a spreadsheet can help you track budgets vs. expenses to maximize returns for every rental property in your portfolio. 

Tips on Keeping to the Budget

Sticking to a budget is a sure way to improve your rental property's profitability. Here are a few ideas for how to optimize your income vs. expenses.

1. Conduct Preventative Maintenance

"A stitch in time saves nine." One of the best ways to keep property maintenance costs to a minimum is to ensure that the property is in excellent condition year-round! Check on and maintain the HVAC and major appliances to limit costly breakdowns and emergency repairs.

2. In-Depth Tenant Screening

Bad tenants can create many unnecessary maintenance expenses. Make sure to compile a thorough screening process, in line with the Federal Fair Housing Act, to help you select quality tenants who will help you take care of your rental property investment.

3. Keep Communication Channels Open

Foster a trusting relationship with your tenants by encouraging open lines of communication. If your tenants believe that you are as invested in their well-being as you are in the condition of your property, they will hopefully treat the rental with the necessary respect. Happy tenants are also more likely to report maintenance problems right away and renew their leases, saving time and expenses.

4. Reevaluate Financing

For most rental property owners, the highest monthly expense is the mortgage. Regularly review your mortgage policy to ensure you are getting the best deal. You can also increase your disposable income by opting to refinance your property.

5. Get the Right Property Insurance

Property insurance can be costly, so shop around for a good deal. However, don't be tempted to skip on landlord insurance. It can save you a great deal of money in the case of serious injury or damage to your property.

6. Maximize Rental Property Tax Deductions

You can offset many of your maintenance and other expenses against your tax bill. A property manager can help you learn which expenses you can claim so that you can save money through tax deductions. Consider reaching out to an accountant to help you with this process.

A Property Manager Manages Your Rental Property Maintenance Budget

Enlisting the help of a Newport News property management company to oversee the well-being of your real estate investment makes good financial sense! Property managers are well-versed in setting accurate budgets for rental properties. In addition, they have a network of reliable vendors to assist with maintenance issues and emergencies.

Work with your property manager to set financial goals for updates and improvements to the property so you can keep it current. This will also help you to dictate a more profitable rental rate.

Partner with the Best Property Managers in Newport News

Investing in real estate can be lucrative with the right strategies! Give yourself the peace of mind of entrusting your real estate asset to an experienced professional property manager. Osprey Property Management is here to help! Reach out to learn more about our property management services and how we can you budget for and maintain profitable properties. 

Find the best property manager for your need! Download the "Guide to Finding the Best Property Manager in Hampton Roads!"