How Much Money Should You Put Aside for Rental Repairs?
Becoming a landlord doesn’t just mean worrying about keeping your property rented and to the right tenants. You also need to be sure you have budgeted for necessary repairs. Read on for some tips on how to plan for the inevitable repair bills.
How much to put aside
As a rule of thumb, you want to have 1% to 3% of your property value set aside for repairs every year. You can’t perfectly predict what you’ll have to pay in any given year, but it’s a good starting point. If you spend less, you can use that to pay for years when you’ll have to spend more. Whatever the number you set, make sure that you have a decent amount of money set aside for repairs.
Be prepared and informed
Before you bought your property, hopefully you had it inspected. This will let you know the age and state of the roof, HVAC, appliances, and the like. This should give you a basic idea of when you’ll need to repair or replace these items, so start putting away money now so you can pay for them when they start to need replacement.
Also, make sure to talk to contractors and get estimates ahead of time. Use those to help set more concrete targets, especially if there’s a specific issue you’re going to have to deal with soon.
Preventative measures
If you spend a little money on basic maintenance and repairs now, you can avoid running into big problems. Make sure to account for these in your maintenance budget, since they’re going to be the most important repairs you’ll make. Regular inspections, cleanings, and other maintenance work will save you a lot of money down the line.
Keep records and update your savings
Nothing beats having actual numbers to work with. As you rent out your property and pay for repairs over time, you’ll start to get an idea of what things cost. The tips above are good for getting started, but as you get more experience, you can plan with actual numbers. As you acquire more properties, you’ll have a better idea of what it will cost by comparing them to what you’ve already had experience with.
Don’t be caught off guard by repair bills for your rental property. Prepare now by starting a savings fund to take care of regular maintenance and the cost of repairs to and replacement of systems, appliances and structural items.
Photo by Sharon McCutcheon on Unsplash
