60k-80k rental properties - maintenance after 10-15 years

12 Replies

Hey,

I would be happy to hear the opinion of investors who invest properties of $60k-$80k.

In all the books, podcasts, articles I have read / heard.. there is some assumption of 5% rule of the annual rent that should allocate for the regular maintenance things.

But for some reason, no one talk about the fact that after 10-15 years holding this kind of properties, it is probably necessary to start replacing the essential things at the property. Such as roof, furnace and more .. it is not mandatory that in one property you should replace everything, but in this kind of properties since they are not new.. in each of them you compermise on something when you purchase it.

What is you strategy after 10-15 years holding this kind of properties?

Thanks

Originally posted by @Aviv Berkovitch :

Hey,

I would be happy to hear the opinion of investors who invest properties of $60k-$80k.

In all the books, podcasts, articles I have read / heard.. there is some assumption of 5% rule of the annual rent that should allocate for the regular maintenance things.

But for some reason, no one talk about the fact that after 10-15 years holding this kind of properties, it is probably necessary to start replacing the essential things at the property. Such as roof, furnace and more .. it is not mandatory that in one property you should replace everything, but in this kind of properties since they are not new.. in each of them you compermise on something when you purchase it.

What is you strategy after 10-15 years holding this kind of properties?

Thanks

 What you stated is what I have always thought...and said, whenever I could.  The 5% retention makes no cents...because it doesn't translate into any rational number of dollar$.  When something breakdown, or needs repair/replacement, the actual cost of that item has nothing at all to do with the rent...or any set % of that rent.  It has a defined cost.  Why would anyone assume that by simply retaining a set percentage of the rent can/will cover it.  Analyzing anything based on a percentage is not smart.  It doesn't work.  Nobody spends money on costs based a percentage.

If a new roof on a house needs replacing, it doesn't cost 5% of the rent...it costs $3500-4500...no matter what the rent is.

@Aviv Berkovitch -  If only it was as simple as that.  I find these big cap ex expenses just kinda pop up suddenly.  I just fix things as they come up, or if it's at the end of it's life (and I have the cash) then I'll get ahead of it and just fix it.  

This winter was a cap ex nightmare for us.  We had to replace 8 furnaces, a couple roofs, and a  ton of plumbing and electrical.  But now we're good for 15+ years

keep in mind its not only major items a rental that has been in service for 15 years could easily have dry rot all over it. could need new paint on the outside..  cabinets beat to crap need replacing  appliances  light figures 

floors replaced redone.. PLUS Roof  electric panel  plumbing and probably waste line to the street ( big money)

especially if your going to sell.. new buyer gets home inspection and well think about when you purchased you wanted all those items fixed..

What @Joe Villeneuve said makes most sense to me.  Find out what the cost and life expectency of all your capital expenses will be and set aside enough money each year to cover those expenses when they happen.

or...

Use the equity in your home that you've accrued the previous 10-15 years and have your tenants pay it back down?

@Aviv Berkovitch there is a cap ex spreadsheet in the files section that will break down the monthly cost of each item. @ sam tato created it. You can create your own if so inclined. roof $4000 25 life span= $4000/25/12= $13 per month capex. These will be in today's dollars. I haven't looked at the spreadsheet lately so I don't know if he takes in consideration of a roof that is 15 years. so you would need to modify the capex to 10 years if you want the property to pay for the replacement. $4000/10/12=$33 per month capex. Good luck on your real estate journey.

Originally posted by @Tim Herman :

@Aviv Berkovitch there is a cap ex spreadsheet in the files section that will break down the monthly cost of each item. @ sam tato created it. You can create your own if so inclined. roof $4000 25 life span= $4000/25/12= $13 per month capex. These will be in today's dollars. I haven't looked at the spreadsheet lately so I don't know if he takes in consideration of a roof that is 15 years. so you would need to modify the capex to 10 years if you want the property to pay for the replacement. $4000/10/12=$33 per month capex. Good luck on your real estate journey.

 good luck getting a new roof  ( tear off replaced) for 4k even in todays dollars..  just sayin..  

one reason I like those skinny row houses in some of the older areas of the north east like Philly BALT  ( tenants not withstanding)

but think of it this way.

you only have a front and back wall so if you have to paint it not much you only have windows from and back.. roof is skinny and there is not the SQ area to fix..  over the long term.. I think cap ex on those type of units compared to stand a long SFRs with 4 walls yards etc bare more investigating for the potential landlord..  it sure changed my out look on them.. being a kid from the burbs.. the though of living next to someone so close was kind of weird.. but the economics of it.. seem plausible.

I keep enough money in reserves and have enough coming in every month to cover the unexpected. I don't use a formula.

When things need maintenance, or break, I take care of them. HVAC units can last 5 years or 20 years. I service them and replace them when they are not cost effective to repair.

When someone moves out I make everything as bullet proof as possible so that I am not getting a call because I used  cheap product that didn't hold up.

Originally posted by @Aviv Berkovitch :

@John Underwood

I see. And for these properties that rented for $800-$1000 a month. Does the 50% (expenses) rule still exists or it's maybe 60% expenses?

 those rules generally apply to those that have property mangers who handle the properties.. owner landlords can do and do better … 

Originally posted by @Aviv Berkovitch :

@John Underwood

I see. And for these properties that rented for $800-$1000 a month. Does the 50% (expenses) rule still exists or it's maybe 60% expenses?

 I may go a year or 2 or 5, with no significant expense, so no it doesn't apply to me.