It is very important for a rental property investor to have a budget that includes unexpected maintenance costs. If something on the property breaks and you do not have the capital to pay for repairs, this can be a major issue. You should know from the beginning that all income that occurs after the mortgage payment is not entirely profit. You will at some point have to put some money back into the property to maintain it, and it matters not how well it is maintained, on occasion there will be things that will unexpectedly break. If you ensure that emergency maintenance expenses are included in your budget, then you will not have to struggle to cover such expenses when they unexpectedly occur.
When even beginning to think about purchasing a rental property, a budget must first be devised and the additional unexpected repair and maintenance costs should be included in that budget. Forgetting to specify funds for unexpected expenses could be quite detrimental to the property owner’s investment endeavor.
Expected expenses for future repairs include those of a roof replacement, air conditioning and heating. Often you can figure how long the life expectancy of the property is and predict when some of the larger costs should be expected.
You can plan to avoid some future maintenance expenses during your process of choosing the rental property. An example would be that you would not have to worry about painting the outside of a brick house, with the exception of the trim. Typically a smaller property will require less to maintain than a larger one.
The amount needed for budgeting repairs can also be dependent on the rental property location. Travel costs will need to be an additional budgeted expense if the property is more than 30 miles from where you live.
You also need to decide who will be doing any maintenance or repairs on your rental property. If you plan to hire someone to take care of these tasks, then you must also budget for hiring costs. You may initially plan to take care of the maintenance and repairs yourself, but you need to make sure that you do not overextend yourself and look at the types of skills that you have in the maintenance tasks that can arise. It is often in your best interest to hire someone that you know knows what they are doing along those lines of repair and maintenance. It could alleviate extra expenses you could incur by blindly attempting a repair yourself.
The guideline for planning your annual budget is to plan for between 1% and 2% of the overall value of the property in order to allocate for unexpected repairs. As with anything, if you plan ahead with an appropriate budget for unexpected repair and maintenance costs then that preparation can save you in the long run.
