There are several
recurring rumors regarding rental repairs in Phoenix and many misinformed myths misconstruing maintenance matters.
While the need to perform maintenance and repairs on rental property is
inevitable, they do not have to be nightmares. So let’s clear up some of the
most common rental property maintenance myths:
Rental Property Maintenance Myth #1: Do-it-Yourself Repairs
Always Save Money
Being able to
take care of your own repairs around the house definitely comes in handy, and
can be a great way to save a few bucks when managing a rental property. If
you’re a skilled handyman and can handle small repairs, basic plumbing tasks or
appliance fixes, by all means save yourself from calling a local tradesman to
make the convenience call.
However, from
the wisdom of Kenny Rogers, “You’ve got to know when to hold ‘em, Know when to
fold ‘em.” Rumor has it that Kenneth wrote this song based on his experience
watching his carpenter father selectively turn down jobs (ok, only part of that
factoid may be true…). But the counsel still stands; even the best DIY jack-
(or jill-) of-all-trades knows when to leave repairs to the pros.
Oftentimes,
even if you can handle the rental
property repair job yourself, does not mean you should. How much is your time worth? Even if you’ve got the time
and energy to take care of the repair yourself, often it makes financial sense
to let a dedicated professional handle the job. Even the most capable DIY
landlords will find themselves in over their head if they try to handle every
job.
Additionally,
Phoenix tenants do not care if you are saving money by doing it yourself. If
you cannot confidently complete the job quickly, conveniently, and correctly,
you owe it to the tenant and yourself to find a qualified technician. Of the
things within your control, one of the leading causes cited by tenants leaving
a rental property when the lease is up, is because of bad experiences from poor
maintenance. The money you might save
doing it yourself is often just a delayed (and greater) loss. The same can
typically be said about the cost of hiring a full-time property manager.
Sometimes it’s just a convenience, but many times the cost of hiring a
professional property manager makes the most long-term financial sense as well.
Rental Property Maintenance Myth #2: Tenants are Responsible
for Maintenance & Repairs
Except in
certain cases such as battery and light bulb replacement, maintenance and
repairs are the physical and financial responsibility of the landlord. Yes, if
the tenant throws a baseball through a window, they are responsible. But even
then, the landlord should be notified and handle the repair, working with the
tenant for the funds, or deducting from a security deposit. But when an
appliance breaks down during the tenant’s stay, it’s typically the result of
years of normal wear-and-tear, in which case the landlord is responsible for
the repair or replacement.
Even
preventative and regular maintenance tasks that traditionally are left to
residents may be better handled by the landlord or property manager. For
example, just because your tenants are certainly capable of regularly replacing
smoke detector batteries and furnace filters does not mean they will remember
to do so. If you are not replacing these items during a regularly scheduled
inspection, providing new batteries and filters at regular intervals will
encourage your residents to do so.
Also, do not
forget the outside. Trees grow, gutters accumulate debris, faucets and
sprinkler systems leak, and bees build hives. Keep an eye out for small
problems inside and out to nip in the bud now, as well as identify potential
future problems to either prevent or plan for.
Rental Property Maintenance Myth #3: Replacing vs Repairing
This
particular property management myth goes both ways. On one extreme, is the
optimist who insists that anything can be repaired, including the
avocado-colored refrigerator they bought for the unit that never gave them any
problems. On the other end of the spectrum, is the argument that it’s always
going to be cheaper to replace than to repair; disposable appliances are the
new norm because “they just don’t make them like they used to.”
Neither
extreme is accurate, and as such, deciding between repairing or replacing a
broken appliance depends on a number of factors. Before you fix in a frenzy OR
rush to replace, you should consider the age and condition of the appliance or
structure, the expected lifetime, previous fixes, and safety concerns (not to
mention evaluating what is specifically wrong, if possible). The general rule
is if an appliance is older than half of its expected lifespan, and the cost of
the repair is over half the cost of replacing (note, not necessarily half the
original cost – there is a difference), then you should replace rather than
repair.
Another
reason to consider repairing instead of replacing is for tax purposes. The costs
of rental property repairs are deductible that year. On the other hand, the
cost of an “improvement” – which most replacements qualify as, will have to be
depreciated over the property’s life expectancy.
Again, as
noted already, it is also very important to consider the impact, implications,
and impression for your tenants. Consider the repercussions of repairing –
losing a good tenant because the repair took too long, took multiple repair
calls, and broke again a month later. An ounce of prevention is worth a pound
of cure… but a pound of cure trumps seventeen individual ounces of repair.
Rental Property Maintenance Myth #4: Estimating Rental
Property Maintenance Costs
Have you
heard of estimating how much money you’ll need to set aside for maintenance
on a rental property? Listed below are a few choice formulas for your
estimating purposes. Which formula is your favorite?
·
50%
Rule: total operating costs (repairs, maintenance, taxes, insurance) will equal
half of your rental property income. So if your property rents for $1,200/mo,
you should expect $600 of that to go to keeping the property up and running.
·
1%
Rule: maintenance will cost about one percent of the property value per year.
So a property valued at $190,000 should cost $1,900 a year to maintain (or $160
a month).
· Square
footage formula: Plan on $1 per square foot for yearly maintenance costs. So a
2,200 foot rental should cost roughly $2,200 a year in maintenance costs.
·
1.5x
rule: maintenance costs will average 1.5 times the monthly rental rate. So if
your home rents for $1,200, then you should anticipate spending approximately
$1,800 a year in repairs.
·
Murphy’s
Law: anything that can go wrong, will go wrong
While it’s
nice to have a rough guess on how much money you should plan on spending on
maintaining your rental property, there are just too many variables to
accurately estimate. Like the English language, there are exceptions to every
“rule.” So use whatever formula you prefer to predict your cost, but keep in
mind these two estimates:
76%
of yearly rental property maintenance and repair costs will be higher than
you’ll expect
99%
of rental property repair and maintenance expenses will be higher than you’ll
want
Rental Property Maintenance Myth #5: What Security Deposits
Cover Security
deposits are a cause of contention for many tenants and landlords, and most of
the time the reason is a lack of communication or understanding of what the
security deposit is actually for. There are two common myths related to
security deposits:Tenant
Misunderstanding: the security deposit is for the last
month’s rent, right?
A.) While many landlords ask for a security deposit that equals a month’s
rent, that does not mean those funds are earmarked for the last month’s rent.
Unless the tenant and landlord specifically work this out together beforehand
in writing, the last month’s rent is expected to be paid in full, and the
security deposit will be handled separately. Even if the security deposit is to
be returned in full, it should not stand-in for the last month’s rent.
B)
Landlord
Misunderstanding: the security deposit can be used for any make-ready, between
vacancy repairs and cleaning costs.
Wrong again. The security deposit is intended to cover unpaid rent and perform
needed repairs or cleaning that result from more
than normal wear and tear. Some landlords intentionally stretch this
rule; others do so out of ignorance. Regardless, the security deposit should
not be used to replace 15 year old counter tops or to paint the home after 7
years. Unless severe damage was caused by the tenants’ intentional or negligent
behavior, these standard wear-and-tear chores are NOT to be paid for with the
security deposit.
RPMWV Phx offers full service Phoenix Real Estate & Phoenix Property Management services. For additional information you can contact us at info@rpmwvphx.com or 602-281-2884
