Friday, July 22, 2016

Investing In Real Estate – Building The Right Team #8: General Maintenance Professionals

Just like at your principle residence, general maintenance items must be done to ensure the property is safe and well maintained. This is general labour type maintenance such as grass cutting, landscaping, snow removal & cleaning of common areas (if in a multi-unit building). Today we are going to elaborate on this subject and discuss a few items you should be aware of.

Can I do this general maintenance myself?

You certainly can get your hands dirty and tackle these items yourself, as long as you have the time and will be completing them on a timely basis. Saving money on these items will certainly increase your cash flow but make sure to put a value on your time. Don’t let the place go in between visits, as poor curb appeal or lack of general maintenance can be a large turn off for tenants and can negatively affect your occupancy rates and rental rates. Maybe you want to start with handling these items yourself when you are just getting started, but as you progress as an investor, and as your portfolio grows, it may be prudent to outsource some help.  

If I hire out my general maintenance, who should I hire?

Grass, landscaping and snow removal can usually be done by a local landscaping company. You can consider hiring your tenant or a tenant in your building to handle these items, but beware of the pitfalls. Especially with snow, if they don’t do their job in a timely manner, you could end up with someone falling and injuring themselves on your property and inheriting legal trouble. On the cleaning of common areas, it is common to see one of the on-site tenants handle the job. Usually the cleaning of the common areas, or handling of grass cutting or snow removal can be done with a reduction in the rent, just make sure it is stated in writing.

How much should I budget for maintenance on my property?

You should budget an ongoing expense for maintenance items regardless of if you do them yourself or contract them out. A good rule of thumb is to budget 5% of gross rent, or up to one month’s gross rent per year, towards repairs and maintenance. This amount will also include large repairs such as roof, furnace, etc. which will be amortized over their expected life to smooth out your repairs and maintenance budgeting year to year. You don’t want to overspend on these maintenance items so you should err on the cheaper side when allocating expense dollars to these items.

Make sure you budget for these maintenance items in your income property and ensure the work is done in a timely manner. You'll be thankful you did!

Readers, do you do your own maintenance on your income properties or do you outsource them?

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