The Real Cost of Property Maintenance
One thing that can easily be overlooked is the importance and cost of property maintenance.  When buying a home or rental property it is easy to miss the hidden costs that maintaining the property will require.

It is not hard to understand if we sit and think about it.  Even with the best of tenants, a house is going to wear out.  The siding will get weathered, the flooring will wear out, the windows will become obsolete, not to mention the roof, furnace, plumbing, electrical and so many more things that make up a property.  All of these things either need to be repaired, replaced or updated... eventually.

If you own your own home, many times you can fix these things on your own.  YouTube has a video for everything and with a little willpower, you can probably hack all these things together at a small cost to you.  Rental Property owners do not have this ability many times.  Licensed plumbers, electricians and even contractors are required in many cases due to the laws & ordinances in your given municipality.  For most repairs, the cost of the repair is 25-50% of the expense.  Labor and Tools make up a very significant cost in maintaining your property.

A good estimate would be to plan on replacing the entire value of your property every 50 years.  This should give you a good estimate on how much you should budget for maintenance.  For example, if you bought a new house for $100,000, you should plan on performing about $2,000 per year just maintaining that house.  If you can do it all yourself, figure 1/2 that cost (your time is essentially free).

OK, now the biggest hidden cost of property maintenance... Neglect.  We all know that things come up and we don't always have that maintenance budget ready.  If we choose to cut corners or push things down the road, we may start experiencing the Neglect Expense.  For home property owners, the neglect expense comes in the form of a lower property value or reduced sale price (if selling).  For example, if your $100,000 home needs a new roof, but you have been putting that off for the last 10 years, when you go to sell it, you may only sell for $90,000, where a new roof would have cost $6,000.  The neglect expense is then $4,000. 


The neglect expense may also come in the form of reduced rent - either from tenants not caring for the property and destroying it faster or from tenants who won't pay their rent or not being able to find tenants at the market rent and having to lower that.  For example, lets say your $100,000 house rents for $1,000/month when you first bought it, but you decided to take some extra profits for the last 5 years and only did a minimum to maintain the 
property.  Now the tenants are moving out and you are looking to find new ones, but know one wants a rusty 
dishwasher and green walls.  You have to lower the rent to $800/month and go with the tenants that will accept the property as is.  The Neglect expense is now $2,400 every year.

In the end, we find that a better maintained property will bring in more rent and increase the property's value over the long run.  Make sure to think about and consider the neglect expense when determining if that repair can be pushed back or must be done today.  Everyone is happier when your property is maintained well!