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ContinueKnowing the types of rental property maintenance expenses to expect can help you evaluate potential purchases and budget for future maintenance costs.
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Effective rental property maintenance is a crucial part of maximizing your investment returns. In fact, staying on top of your property maintenance can make the difference between having positive or negative cash flow.
Investing in regular and proactive maintenance can help you attract quality tenants, reduce vacancy periods, and increase your rental income. On top of this, properly managed maintenance reduces your overall maintenance costs by preventing larger, more costly repairs down the road.
Knowing the types of maintenance expenses to expect can help you evaluate potential purchases more accurately and prepare better budgets for both planned and unexpected maintenance costs. By keeping a close eye on your maintenance expenses and using the right tools, such as property management software like Landlord Studio, you can increase the profitability of your rental properties and achieve long-term financial success.
Key takeaways
Rental property maintenance expenses can be divided into two types: capital expenses and maintenance expenses. Although both expenses are tax deductible, they are treated differently by the Internal Revenue Service (IRS).
Capital expenses are incurred for the purpose of improving or restoring a rental property or adapting it for a different use. Examples of capital expenses include replacing a roof, installing a new HVAC system, or adding a room to the property. The cost of capital expenses can be recovered through depreciation over a fixed period of time.
On the other hand, maintenance expenses are necessary expenses for managing, conserving, and maintaining a rental property. These expenses include routine tasks such as fixing a leaking pipe, replacing dirty air filters, and landscaping. The cost of maintenance expenses is deductible from rental income at the time the expense is incurred.
It's important for property owners to differentiate between capital and maintenance expenses when planning their budgets and preparing for tax deductions. By doing so, they can better manage their cash flow and maximize their tax savings.
Properly managed rental property maintenance is essential for attracting quality tenants, reducing vacancy rates, and increasing rental income. A well-maintained property can also help avoid costly repairs and minimize liability risks.
Using property management software like Landlord Studio can help you streamline the maintenance management process. Features like reminders can help you stay on top of routine maintenance tasks. You can also easily track and prioritize jobs, and utilize Landlord Studio’s accounting tools to stay on top of property maintenance expenses.
Additionally, when you use our online rent collection feature, tenants can easily submit maintenance requests online through the portal or via the tenant app. Simplifying maintenance comms like this will help you stay on top of tasks, reduce costs, and improve tenant relations for happier tenants that stay longer.
Ultimately, properly maintained rental properties attract quality tenants and increase rental income leading to long-term financial success.
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When owning a rental property, it's important to be aware of the property maintenance expenses you may encounter. While not all of the following expenses will apply to every type of rental property, knowing what to expect can help landlords budget and plan accordingly. For example, while multifamily landlords may directly pay for utilities, such as electricity, tenants in single-family rentals typically pay for their own utilities.
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To extend the lifespan of appliances and mechanical systems like electrical, plumbing, HVAC, and water heaters, periodic maintenance is necessary. This can prevent unexpected breakdowns and lower replacement costs.
A deep cleaning is typically required between tenant turnovers to make the home rent-ready for new tenants. This includes sanitizing the kitchen and bathrooms, dusting, scrubbing, and steam-cleaning carpets and flooring.
Sometimes unexpected repairs like an overflowing toilet or a malfunctioning water heater pilot light require immediate attention. Having a reserve account and being reachable 24/7 can help address these issues quickly.
Minor repairs to flooring may be necessary during occupancy and between tenant turnovers. A professional cleaning company can typically make cosmetic repairs to make older flooring look new.
Monthly HOA fees and dues can be obtained from the HOA management company. When purchasing a rental property, it's important to ask about any planned fee increases or special assessments and request copies of the HOA's financial statements.
Regular maintenance includes fixing water leaks, patching worn carpets, replacing tile or roof shingles, and fixing broken sprinkler heads. Periodic property inspections can help catch minor issues before they become major and costly.
Rental properties are inspected when tenants move out and periodically throughout the tenancy. Interior rental property inspections are generally performed every 3 to 6 months with proper notice to tenants, and occasional exterior drive-by inspections are also recommended.
Landscaping costs vary depending on the location and season, and it's up to the landlord to ensure curb appeal meets local standards. This can be outsourced, or if you're a property manager you could consider using landscaping business apps to streamline the process and offer this as part of your services.
A fresh coat of paint can improve a rental property's appearance, but it's best to use a generic off-white to avoid frequent repainting due to color trends.
Pest control for common pests like ants, termites, and rodents should be monitored regularly, and one-time infestations should be budgeted for.
A capital expense account can help landlords save for replacement costs of appliances, heating and cooling systems, and other wear and tear items.
Regular maintenance tasks like snow removal, gutter cleaning, and pruning should be performed to keep the property in good condition.
Though no strictly speaking classified as maintenance expenses, the following are regular expenses you are likely to accrue when operating your rental property.
High property taxes can affect profits, so it's important to research historical tax hikes before purchasing a rental property.
Property management fees vary but generally range from 8-12% of monthly rental income. One-time fees may also apply.
This landlord insurance is designed specifically for rental properties and includes liability and property protection. Factors affecting the premium include coverage type, deductible amount, and number of claims filed for the property.
Tenants typically pay for their own utilities, but landlords may pay for common-area utilities if they own a multi-family property. During tenant turnover, utilities can be transferred into the owner's account instead of being turned off.
Automating income and expense tracking can help landlords avoid forgetting to enter a deduction and reduce taxable net income.
Landlord Studio is a rental property software that provides a comprehensive owner's dashboard by linking bank accounts and entering rental property addresses. It can be used for an unlimited number of portfolios and rental properties, including small multifamily buildings and short-term vacation rentals.
With Landlord Studio you can automate your income and expense management using bank feeds, automated online rent collection, and recurring expenses. Then instantly generate any of over 18 powerful reports for deep-dive insights into your portfolio’s profitability so you have all the data you need for smarter investment decisions and an easier tax time.
Landlord Studio is an easy to use property management and accounting software designed for landlords.
Find and screen tenants, collect rent online, track income and expenses, run reports, and more - all for free.
Learn how you can simplify your year-end tax preparations. Join Our Free Webinar with guest speaker, Real Estate CPA Thomas Castelli.
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