Rental property maintenance is something you will deal with if you own rental property. If you own your own home then you really should be used to performing maintenance, as you should be doing so on your personal residence. The difference is you can perform maintenance on your own residence to your satisfaction and timelines, but with a rental property there is a second party to consider. And how does the cost of the maintenance affect your investment profitability?
While the hope is that most rental relationships are honest and mutually beneficial, it is still a relationship where each side has their own wants and needs. You want to receive payment on time and spend as little as possible on the home (less expenses = more profit). The tenant wants everything in the property work and perform as expected for the rent paid. When it doesn’t, they they won't care what it costs to "make things right.” Thus, property maintenance can be the key to a good rental relationship.
Scheduling maintenance throughout the year helps you balance the expenses with incoming rental payments to keep a positive cash flow. By understanding the impending costs, you can set aside a certain amount from each month’s rental payment to cover them. It also allows you to inform the tenant about maintenance crews being at the property.
While having a solid maintenance plan is a great first step, your property will require maintenance that is unexpected. In these cases, you will need to come up with the cash to cover the charges. It's not a matter of if this will happen, but rather when it will happen. Typically you would want to set aside 1 - 3% of the property value for maintenance. So setting aside an additional 1% will help with unexpected costs. Over time you will have a better understanding of what needs to be set aside.
While much of the property maintenance will be planned, you need to implement a process for your tenant to request maintenance. This will ensure your tenant knows what to do if maintenance is required, allows you to record maintenance items outside of the norm, and track where you are in resolving the issue. The historical information recorded will help you budget for maintenance and repairs down the road. It also will provide a level of comfort to your tenant.
There are two huge reasons why you should resolve maintenance and repair issues immediately. First, you owe a duty to your tenant to provide a safe and comfortable place to live. Secondly, you want to prevent any further damage by resolving the issue ASAP. There is also a psychological effect. If your tenant sees that you care about the property, they will be more likely to treat the property well.
When an issue is reported do your best to resolve it within 24 hours. If it will take longer, be sure to communicate to your tenant what you have done and why it will take a little longer to fix the issue.
Handling rental property maintenance issues can be one of the most challenging aspects of being a property investor and landlord. As in most cases, communication is the key to keeping maintenance issues as a minor issue rather than escalating to a larger one. Having a plan and process in place will ensure that when something does go wrong, there is a path to get things back on track.
GSR Property Manager assists property owners in maximizing revenue potential while minimizing the hassles in managing their properties. There are a lot of factors that go into making a property a successful investment and we put our experience to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.
If you’re looking to add residual income with an investment property, then you will need to understand the specific Atlanta rental property costs. Some costs will vary depending upon city, state and region you are in. Be sure that you research rental property costs as close as possible to the actual location. Once you’ve purchased and set a rental price is not the time to discover new or actual costs.
Purchase costs: These are your upfront purchase costs including loan fees, closing fees, interest payments, your downpayment. All of the costs associated with purchasing your investment property are included here. After these costs you will have a mortgage payment that details how much prinicipal, and interest you pay with each payment.
Property taxes: Property taxes are included in your mortgage payment, so during your first year of your investment property purchase, they are accounted for. In subsequent years the property tax effect can drive the monthly mortgage payment higher. This tax amount will be dependent upon whether your estimated home value increases or decreases and whether or not your county millage rate increases or decreases.
Maintenance costs: Costs for maintaining a rental property are part of the cost of being a homeowner or a landlord. Appliances breakdown, systems fail, roofs or basements leak …stuff happens. You’ll need to estimate an amount to set aside for routine maintenance. If you’ve been a landlord for a while you likely have a good understanding of what’s required. If this is your first investment property, you have to use some formula to estimate an amount. Fannie Mae recommends that you set aside 2% of the property value for annual maintenance costs. On average 1-3% of the property value seems to be the average amount set aside.
Insurance: Much like your primary residence you will need insurance coverage for your investment property. Instead of a homeowners policy, though, you need a landlord policy, also known as a dwelling policy. There are three dwelling options:
While the above takes care of the indemnity side of insurance, you also need to ensure that the liability side is protected. The difference in cost between $500,000 coverage and $1,000,000 of coverage is only a couple of hundred dollars annually, so we recommend going with the higher amount.
Utilities: Depending upon how you structure the contract you may or may not be responsible for some or all of the utilities. It really depends upon the market, as covering some utilities can be a good marketing offer. Even if the renter covers all of the utilities you will need to be prepared in case the property becomes vacant. If so, you will then need to handle the utilities until the unit is rented once again.
Vacancy: If you unit is not rented you have to cover the costs and expenses during the vacated period. If you’re lucky enough an your property remains rented its not an issue. For planning purposes you should budget and set aside about 10% of rents to cover future vacancy time periods.
These are only a few of the Atlanta rental property costs you might encounter as a Landlord. Additional costs might include advertising your property when its vacant, hiring a property management company to manage your unit (s), and other unexpected costs. You can’t plan for everything so its wise to build up a emergency fund for each property.
If this all seems confusing or time consuming, maybe you should consider hiring a property manager. GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.