How much does it cost to maintain a rental property? For example, what’s included in your maintenance budget? How much should tenants be responsible for? What type of repairs and maintenance do you do as the landlord? When do you call in the professionals? It can all be very confusing, but fortunately, you don’t have to figure it out on your own! Check out this handy guide to get answers to all your questions about rental property maintenance costs!
1) Rental Property Maintenance Costs
The first question you may be asking is – What is maintenance? The second question may be – What is considered maintenance on a rental property? Maintenance is the activity you do to maintain, preserve, or keep something in workable condition. For example, you maintain the workable condition of your body by drinking water, eating healthy, exercising, and reducing stress. All of those activities can be considered maintenance costs for your body.
For rental properties, maintenance costs are produced by different activities. When you buy a rental property, you’re probably aware that your expenses will be twofold. That’s because not only do you have to account for your mortgage payment and taxes, but you also have to budget for rental property maintenance costs. For example, if one of your tenants overflows the bathtub, leaves home, and it floods the floor and leaks into the apartment below, you will need to ensure proper clean up and any repairs of damaged flooring/ceiling; otherwise, mold can start growing and pose other health hazards and costly expenses. Likewise, there are routine maintenance items like cleaning gutters and maintaining the lawn and landscaping.
2) Budgeting for Rental Property Maintenance Costs
The “bigger picture” rental property owners should look at more than just their rental income when figuring out if they’re going to turn a profit on their rental. Maintenance and repairs often make up a significant portion of expenses. They can also be very unpredictable. That said, there are ways for you to figure out what you need to budget for repairs and maintenance over the course of a year, as well as how much tenant-paid maintenance you want to include in your rent.
When you think about it, property maintenance costs for landlords and rental property are not very different from the average maintenance cost of a property owned by the typical homeowner. An easy way to start your budget is to use a template for normal homeowner maintenance costs, and adjust it for a rental property. Here’s an example below.
How much should I budget for maintenance on a rental property?
1. Keep what makes sense in the chart below for your rental property and remove what doesn’t.
2. Add anything missing.
3. Take an existing monthly cost and multiply it by 12, or take an annual estimate and divide it by 12.
Average Homeowner Property Maintenance Expenses
| Monthly | Annual | |
| HVAC | $20.00 | $240.00 |
| Fireplace/Chimney cleaning | $21.00 | $252.00 |
| Plumbing | $10.00 | $120.00 |
| Gutters | $13.00 | $156.00 |
| Repairs and general maintenance | $170.00 | $2,040.00 |
| Utilities | $200.00 | $2,400.00 |
| Lawn care/landscaping/snow removal | $130.00 | $1,560.00 |
| Homeowners insurance | $80.00 | $960.00 |
| Totals | $644.00 | $7,728.00 |
Other Methods to Calculate Costs for Rental Property Maintenance
1. Using historical data. History repeats itself. After using and changing the template above to fit your needs, use 2 to 3 years of historical data and come up with averages.
2. 8% of total expenses. According to the National Apartment Association, repairs and maintenance can be up to 8% of the operating expenses per rental unit.
3. 50% of rental income. The key with setting aside 50% of rental income is to make sure you don’t spend it! You need to have the same discipline as our example of body maintenance costs. Part of being successful in a healthy eating program is to not have bad choices in the pantry. With the expenses you are budgeting for maintenance, put them in an account that is only used for property maintenance and repairs.
4. 1% of home value. Estimate the annual maintenance costs to budget by multiplying the fair market value of the home by 1% for the annual maintenance costs.
5. Square Foot Method. Take the square footage of the property and multiply it by $1 to estimate the rental maintenance expenses for a year. Divide by 12 for the monthly costs. If you are unsure about the square footage, you can check Zillow or the local property tax assessment records. Many property records can be found online through city or county government websites.
Which Property Maintenance Budgeting Method Should I Use?
If you are looking to purchase a property and need to estimate future profits to narrow down your choices, start with the square foot method because you may not have any other information to go on. If you own other rental property or have experience, you may have enough information to use the 8% of total expense, 1% of home value, or 50% of rental income methods to forecast maintenance expenses. Finally, if you are trying to get a hold of what your existing property costs are, using historical data is the best and most accurate. View a comparison of the maintenance budget methods below.
Given property data:
- 3 bedroom, 2 bath rental property
- 1,268 sqft
- $1,649/mo rent
- $210,000 Fair Market Value
- $2,349/yr property taxes
- Historical data in the image below is taken from the average monthly maintenance expenses in the previous section.
Additional resources to help estimate maintenance expenses:
3) Things Landlords Have to Pay For
As we’ve discussed, when you own a rental property, you’re responsible for paying to make repairs to your rental units and keeping them maintained. Things like appliances, roofs, furnaces and other things break regularly or need to be replaced in these types of properties; when they do, it’s up to you to pay for them. Although there are some exceptions—specifically, check if your local laws mandate that tenants must pay for certain things themselves—you should budget for repair and maintenance costs using the methods discussed in this article or any method that you are personally comfortable with for the purpose of maintaining your rental property. However, your tenant is not completely off the hook for maintaining the rental property and contributing to maintenance expenses. The next section will help you set expectations with tenants.
4) Things Tenants Should Pay For
While landlords must ensure that rental properties are well-maintained and safe, they can pass on certain tasks to tenants. Tenants should be responsible for fixing small issues such as replacing fuses, changing light bulbs and servicing their own smoke detectors. If a tenant damages a unit through negligence, he or she should be held financially responsible for repairs.
Landlords may require tenants to have renter’s insurance to cover damage caused by themselves or guests. If a problem stems from an issue with the physical structure of your home, you should always instruct the tenants to call you first.
Some tenants may desire to take care of the lawn or landscaping on their own as a source of pride, or even as a hobby or relaxation such as gardening. If you have a tenant who is handy, you can negotiate a lower rent in exchange for their sweat equity to maintain the unit. Costs that may be passed on or added to the rent include common area maintenance, laundry rooms and/or landlord furnished washers and dryers, or security systems.
In Conclusion
For any rental property owner, maintenance costs are critical expenses to keep track of and budget for. There are many methods you can use to estimate maintenance costs, but you should get to the point where you have a reserve budgeted for your rental property that is only used for those expenses. Those costs can be offset by having your tenants pay for them either directly, or passed on to them through rent. If you are having trouble managing these expenses, read this article about how a property manager might be able to help you.
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