Average maintenance cost for a rental property
What is the standard assumption for rental property maintenance cost?
The annual maintenance cost for a rental property will vary significantly depending on a few factors, such as:
- the age of the property
- newer properties generally have lower maintenance costs
- the size of the property
- larger properties will have more maintenance
- the turnover of your tenants
- higher turnover for a property such as an AirBnB generally means more maintenance costs
So, as you can see, given the variety of influential factors it can be tough to pin down a 'standard' number across the rental industry. Personally, for long-term single family rentals we find ~20% of gross rental income to be a sufficient assumption for maintenance and repairs on a property. Again, we may flex that number up or down a bit depending on the factors outlined above. Some additional assumptions we've seen used are assuming 1% of the property value per year, or $1 per square foot.
When projecting the overall maintenance costs for your specific property, it can be helpful to break down the cost into the specific types of expected maintenance and assign $ amounts to those. Below, we'll walk through the common types of maintenance, repair, and capital expenditure (CapEx) costs associated with rental properties.
What are common maintenance, repair, and CapEx costs for rental properties?
By law, landlords are required to maintain basic standards in their rental properties. Generally, these standards are related around addressing any issues with the following:
- Structural issues
- Electrical issues
- Plumbing system issues
- Pest infestations
- Mold found in property
- Anything else threatening the health/safety of tenants
To comply with the following (and to ensure a positive experience for your tenants / maintain high levels of occupancy), several types of maintenance may be required. We will split maintenance into the following 4 categories:
- Routine maintenance
- Seasonal maintenance
- Emergency maintenance
- Property turnover
This is probably the most common maintenance expense and essential for running a compliant property and reducing the risk of large unexpected costs. This includes general maintenance around systems such as the HVAC and sump pump (where applicable), along with regular checkups throughout the year to ensure appliances are running smoothly / without issue (such as washer, dryer, refrigerator, stove, etc).
This will of course depend on where your property is located, but can include things such as cleaning the gutters, ensuring the sprinkler system has been winterized, snow removal, and landscaping (some of this may fall on your tenant, but it depends on the terms of your agreement). Personally, we like to take over as much of the seasonal maintenance as possible to ensure it's completed timely and correctly while factoring those costs into the rent being charged.
Every landlord's worst nightmare, emergency maintenance can be reduced by diligently running preventative maintenance, but is still an inevitability given enough properties or on a long enough time scale. Emergency maintenance (as the name implies) occurs when least expected, and can include things such as a broken water heater, a burst pipe, broken window or door, among others. These events require immediate action from the property manager (or landlord) in order to continue ensuring your tenant has a habitable property and preventing yourself from even more extensive damage. When buying an investment property, this is why it's critical to have an inspection and make note of things that could potentially become large issues (such as poor structural foundation, issues with pipes, or an old appliance, HVAC system, or water heater); by doing this, you can try to estimate the likelihood of these costly expenditures and put in your offer accordingly.
Property turnover involves getting the property ready for a new tenant after an existing one has left. This includes items such as:
- touching up paint
- replacing floor panels where needed
- any repairs (due to wear and tear or otherwise)
As we can see, there are a lot of factors to consider when trying to plan / budget for maintenance. So, it's important to break the maintenance cost down into smaller pieces and then stack them together to form an overall budget. It's also important to note the initial age and condition of the property, and ensure you're taking these critical factors into account when making a maintenance cost assumption. However, if you plan ahead and budget conservatively, things like maintenance should be no sweat and you should be able to still generate solid expected returns while maintaining a nice property to the benefit of both your tenant and yourself.