As a landlord, it’s part of your job to handle the necessary repairs at your income property. Even if you have a property manager take care of these tasks for you, you still need to have disposable income ready for everything from minor repairs to emergency ones.
While having available funds for repairs is essential, not everyone is clear on exactly how much they should have saved. How much should you set aside for rental property repairs? Here a few rules to keep in mind when determining your budget for rental property repairs!
Between 1 to 3 Percent of the Property’s Value Annually
Every year, you should consider having at least 1 percent and up to 3 percent of your property value saved for repairs. For example, if your property is worth $300,000, no matter how much money you’re getting in rent every month, you should have between $3,000 and $9,000 saved for repairs.
While some owners may think saving 3 percent of the property value every year for repairs sounds excessive, it certainly doesn’t hurt to have some extra cash put away in the event of an emergency!
Save 50 Percent of Rental Property Income
The 50 percent rule states that whatever your rental property income amounts to, half of that will go towards both repairs and maintenance of the property.
Say your rental unit nets $1,000 every month, which means you receive $12,000 a year for that particularly property. This means $6,000 of this should be set aside to handle the basic needs of the property.
Consider Putting Away $1 Per Square Foot Annually
Other property managers suggest having $1 saved for every square foot of your income property. Say you’re renting out a 1,500 square-foot basement—this rule means you’d need $1,500 for repairs every year. While you may not spend this much on repairs, it’s important to have funds readily available!
Expect the Unexpected When It Comes to Repairs
While all of these guidelines provide some general ideas for property owners when it comes to budgeting for rental property repairs, they’re all estimated amounts. Every property will be different depending on its construction, age, condition, and even its location.
No matter how much you choose to have saved, keep in mind that most rental property repairs are probably going to cost more than you expect.
While you may be able to handle some maintenance tasks yourself, others will require you hire a professional to do the work. In addition, emergencies can always happen, even if your income property is brand-new!
Let Us Help You Make and Stick to a Budget
Having a budget for rental property repairs and sticking to it will help you in the long run. You’ll be grateful later when the roof starts leaking or the dishwasher breaks and ruins the kitchen floor.
While maintenance costs can vary, keep your savings and don’t use them for anything else. At FAS Management, our experienced property managers can help you budget for repairs and manage your property to ensure you stay profitable despite repair costs.
By having the right amount saved and working with your professional property management team, you can enjoy your income property for many years to come. Contact us at FAS Management today at (202) 337-5080 to learn more about our property management solutions in Washington DC!