As the owner of rental property, the last thing you want to hear is that something needs to be repaired – or worse yet, that a major system in the property needs to be replaced. The thought of this alone can send panic into your mind. But the truth is that rental property repairs are just another part of owning investment real estate.
The good news is that, just like setting up an emergency fund for your own personal expenses, you can – and should – do the same for each of the rental properties that you own. You can start the process by estimating how much you may need to set aside to keep in a reserve account.
Estimating the Cost of Rental Property Repairs
There are actually two ways that you can come up with a good estimate on the potential costs for your rental properties’ repair and maintenance. One is to contact several local contractors and get an approximate figure on how much it would be to repair or replace systems such as the roof, HVAC, and plumbing. These are the most common areas that will often need service.
You could also assume an average percentage of 1 to 3 percent of the property’s value that would need repair. So, if a property is worth $100,000, then figuring between $1,000 and $3,000 would be a good estimate.
Coming Up with the Necessary Funds
Planning ahead for the funds that you need can help to save you from paying out a large, unanticipated amount if or when an emergency comes up. One of the best ways to be prepared for repair and / or maintenance costs is to set aside a percentage of the rental income each month as it comes in.
By having this money already in a separate account, you can alleviate having to either withdraw funds from other accounts, or having to put the repair costs on credit. And, if there are no repairs needed on a property, the funds can continue to build up in the account over time.
There are also ways that you don’t have to spend your own personal time working with contractors and managing the repairs yourself on your rental properties. That is by working with a property manager. Doing so can help you to free up more of your time, yet can still allow you to reap the benefits of your real estate investments. For more information on the many advantages of partnering with a property manager for your real estate investments in the Orlando and surrounding area, Contact Us.