Today I’m just talking about the day to day stuff of owning properties. Repairs, improvements, and maintenance.
Over the past year at our properties, we’ve done the following repairs, capital improvements, and maintenance:
-Replaced a furnace that was 10+ years old
-Replaced a roof and three windows
-Did seasonal maintenance on all furnaces and A/Cs
-Got non-functional commercial HVACs up and running
-Replaced a sewer pipe with a bigger one
-Repaired a leak in a rubber roof
-Upgraded all electrical outlets from two prong to three prong
-Fixed the grading and downspouts on a single family home
-Installed an egress window, sump pump and drain tile system
-Repaired the cartridge on a bathtub so the hot water works
-Did bat and mouse pest remediation
-Replaced a broken exterior door
That might look like a lot, but remember this is spread out over multiple properties. We’ve had a higher amount of maintenance requests this year, probably due to the weather. Usually we average about one maintenance request per property per year. Those repair requests are usually minor...less than $300 per unit.
So with all of those repairs, how do we make money on our rentals? Well for one, we’re not paying for those repairs out of our profits. We have a separate repair and maintenance reserve account where we pay for those items. And each time we collect rent, we put 10-15% of the rent into that account. That way, we have money to use towards repairs when they come up. We usually buy our properties assuming that 10-15% on top of any cash flow we want to get. So repairs don’t impact our profits much at all.
We also plan for capital improvements in advance, and budget and plan for those items in advance. The roofs, heating and cooling, and other systems of your properties are big ticket items that have a usable life span. So we keep enough in reserves so that when we want or need to make a big investment it doesn’t cause financial strain. There are many ways to do this. Some folks like to keep 3-6 months worth of rent in their accounts. Others will budget 1-5% of the total value of their properties. I tend to do the 3-6 month approach because it’s easier to calculate.
And if you’re wondering….no we do not yet have as much as I’d like in reserves. We’re working on it!
We also do regular maintenance checks and repairs on all of our doors. If you wait until you receive a maintenance or repair request before you invest in your properties, the problems you experience end up being bigger and more costly. We try to check in on our properties 2-4 times per year.
So many people focus obsessively on just continually acquiring, acquiring, acquiring properties. Then they wonder why they aren’t making any money. It’s because they haven’t invested back into the properties they already own.
Think you have what it takes to be a landlord? Let’s chat! With the right systems being a self-managing landlord is a breeze! You can do it!