How Do Property Maintenance Expenses Impact Your Portfolio's Profitability?

How Do Property Maintenance Expenses Impact Your Portfolio's Profitability?

Around 22 million Americans call themselves landlords, and they own 48.5 million rental units in the U.S. With ownership comes responsibility, and one of the biggest responsibilities is maintaining the property.

As a landlord, you face expected and unexpected maintenance issues. These can cost landlords up to 4% of the property's value annually. Taking care of these issues helps keep the property in good shape and preserves the property value.

Property maintenance is one of the best long-term strategies to protect your investment portfolio but can be costly. Keep reading as we explain how to balance maintenance expenses.

Understanding Property Maintenance Expenses

Rental property maintenance expenses are an essential part of managing investment properties. When doing property accounting, it's difficult to predict the exact yearly maintenance expenditures. Let's take a look at the two categories of maintenance expenses.

Fixed Expenses

Fixed expenses are those that occur regularly. These include monthly or yearly expenses like pest control, landscaping, lawn care, pressure washing, and HVAC tune-ups. Include these expenses in your budget.

Variable Expenses

Variable expenses are those that come up over the long term. Things like a new roof, exterior paint, and appliance repairs or maintenance.

In addition, landlords and property managers have to factor in expenses that occur when a tenant moves out. Some of these may be covered by the tenant's security deposit.

Impact on Portfolio Profitability

When a landlord is unprepared for maintenance costs, especially unexpected ones, it will have a large impact on his or her profitability. Dipping into savings or borrowing money to cover unforeseen issues hurts profits.

Strategies to Manage Maintenance Costs

Managing maintenance costs and working to cut costs helps grow your portfolio profitability. Let's look at strategies to manage these costs.

Tax Deductions

There are tax deductions available for certain expenses. Consult a tax professional to find out how to take advantage of all available tax deductions. Keep records and properly report income and expenses related to your rental property.

Make a Budget

When you know your monthly or yearly maintenance costs, you can set aside a portion of your rental income to cover those costs. Use tools like rental property accounting software or spreadsheets to track your expenses.

These tools will help you manage your income versus costs so you can make informed decisions about your investments.

Establish an Emergency Fund

It's key to have an emergency fund so you're prepared for unexpected maintenance expenses. An emergency fund is a financial safety net.

Put aside a certain amount of money each month in a separate fund. These funds will be available for unexpected expenses and will keep you from having to go into debt or take money from savings.

Maximize Your Rental Property's Potential

Now that you know the impact property maintenance can have on your portfolio profitability, be sure to use proper planning and budgeting to help you make the most of your investment.

Do you know who can help you manage property maintenance for your rental properties? We at Property Management Real Estate Services, Inc., in the Phoenix, Arizona, area offer responsive, 24/7 maintenance support and an after-hours emergency line. Schedule a consultation through our website or by calling 480.530.6985 to discuss how our services can help you.