As a home owner, it is important to have an estimation of how much it will cost to maintain your property; the answer is not simple in that there are many variables including size, age, condition and amenities.
Home maintenance for property investors can be divided into three categories:
- Annual maintenance
- Replacement or longer-term costs
- Tenancy – to get the property ready for a tenancy and for turnovers
The latter expense should not be included from the rough estimation of maintenance as it will depend on how often a property is turned over from tenant to tenant. In general, turnover expenses are high and reflects the landlord’s standards. Turnover expenses typically include:
- Refreshing all batteries in detectors throughout the home
- Rekeying the locks for security purposes
- Remediating wall damages throughout from normal wear and tear to ready the property for the following tenancy
- Cleaning not covered by the previous tenant which would include sanitization, an cleaning of areas that are difficult to reach such as dust and bugs in light fixtures and removing calcium build-up on faucets
- For furnished properties, the home will need to be re-staged and linens and towels and all household items thoroughly cleaned
Generally, banks for mortgage financing calculations and stress tests for purchasers to estimate expenses, often use the ‘1% Rule’. This is a very rough assessment and is based on the purchase price. For instance, if the purchase price was $500K, then the owner should budget $5K for maintenance. Some feel that 3-5% is more realistic which is this example would mean $15-25K per year to keep the property in good repair.
Another approach is using the property size based on $1 per ft2 for annual maintenance and repair costs. There are many problems with using this methodology.
The general rule for rental properties is to factor approximately 8.3% of the rent annually which is equivalent to one month’s rent, anticipated or collected, for apartment condominiums as an estimation of maintenance and repair costs. Monthly condominium fees generally cover the expenses related to maintenance and upkeep of the common areas including the envelope and HVAC system, an insurance component, landscaping and contributions to the reserve fund.
Maintenance and upkeep for single family freehold homes generally cost more as compared to condominiums, as HVAC systems, roofs, envelope and yard expenses needs to be factored in – as such, our experience suggest an estimation of closer to 15% of gross rent.
To exemplify, the anticipated life for components in a single-family home as compared to a type apartment style condominium would include and are:
Hot water tank – 12 years
Roof – 15-25 years (depending on the type)
For rental properties, whether the property be an apartment condominium or ingle-family home, maintenance and upkeep include items listed below also indicating the expected life for each:
Interior painting – 6 years
Faucets – 15 years
Carpet – 16 years
Refrigerator – 15 years
Washing/Drying Machine – 12 years
Stoves & Ranges – 15 years
Dishwasher – 10 years