Repairs are killing me!

General Landlording & Rental Properties
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Repairs are killing me!

Elijah White
New to Real Estate · Aubrey, TX · Member since 2019 · 11 posts · 12 votes

Hello all, 

I have two rental properties in Wichita, KS; both are single family homes that should cash flow around $250 per month but the repairs and fixes that I have had to do over the past six months (and especially the last month) have just been destroying my cash flow. A few months ago I had to have a tree cut down at one property, which cost $1050, then this month I have had a frozen pipe at one house, a clogged main sewer line at the other, a broken refrigerator and an electrical issue. In total, I am looking at ~$750 in repairs this month alone!! Is this just part of the growing pains and part of the learning process to become a real estate investor or am I doing something wrong? Should I never buy houses that are built before 1970 again? Both of these houses were built in the 1950's and I wonder if maybe that is part of the issue.

Thanks in advance for any advice!

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Tina Tsysh
New to Real Estate · Orange County, CA · Member since 2020 · 214 posts · 184 votes
5y

In your property's cash flow analysis you should always include some expenses to go towards vacancy, repairs and maintenance. Even though you won't have those cash outflows every month, you should always account for them. Are your total repairs for the year exceed the cash flow you are getting? If so, you might want to do some rehab work and raise rents to get higher cash flows or if you are in the minus for the year on cash flow, you might want to consider selling your properties or doing a 1031 exchange. 

However, remember that with real estate there are a lot more perks than cash flow. There is appreciation, tax deductions, and principal reduction. You have to factor in those benefits as well. Even if you are breaking even on a property in terms of cash flow, you are getting so many additional benefits that in a few years you will become cash flow positive.

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  • Allen L.
    Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
    5y

    Hi Elijah,

    In Wichita, I think houses built in the 1950s are the best because they are located in convenient blue collar neighborhoods and usually priced around 50-70K and rents for 700-850 per month so the cash flow is great. I own many properties built around 1950s and never had those problems yet -- I think your case sounds like partially bad luck. The other thing is you start seeing a lot of variance in houses that old, some function great, but many others start showing age and systems issues like you mentioned. Really keep on top of annual maintenance and when you buy more houses do a good home inspection and calculate expected capex in the coming 3 years. Also, you didn't mention this in detail, but when you said that you cut down a tree -- was that completely necessary and a trim wouldn't suffice? Trimming can cut the tree expense down to 1/3. $1050 sounds like they cut down the tree and grinded the base. You can always find a handyman for tree trimming which opens up options. Also, do you have good tenants? Clogged main sewer line could be that tenants were flushing random stuff like diapers and tampons, in that case theoretically they should pay, or at the very least keep all of their deposit when they move out.

    The rule of thumb that I use is $2250 in capex per property and $500 for maintenance per year per property. Despite some years are worse and some better, it should average to here. From this perspective you had a bad year for maintenance and dug into your capex a bit but it's not SO BAD you know? So I created a spreadsheet that I use to index capex to sqft and number of bathrooms which has been super helpful. Try to think about how you would go about analyzing properties better and shoot me a msg if you want to discuss. Unlike equities, in real estate, money is made when you PURCHASE the property.

    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    5y

    @Elijah White

    Elijah, The Real Estate Road is a long and bumpy one. That's the bad news. The good news? It leads to a destination of riches.

    I paid over $100,000 this month in property taxes for half a year. Really damaged my cash flow this month. The other 10 months (another tax payment due in six months) I'm in very good shape.

    I have so much cash flow, in fact, that CAPEX is no longer a concern for me. I'm able to do whatever repairs or upgrades are necessary without a thought and still have plenty of cash left to make mortgage free acquisitions to my portfolio.

    My message to you: It takes awhile to get to this point, but you won't be sorry you did.

    Best of luck to you.

    Gary

    2Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
    5y

    @Elijah White

    I have 12 sfh all built in the mid 1990s to early 2000 and I still have repairs every year. There will always be hvac units, hot water heaters, and roofs which need to be replaced. Important to have a cash reserve set aside so you can covet these expenses. Letting things go only means you get to pay more, much more, down the road.

    0Reply
  • Tony Link
    Investor · Amarillo, TX · Member since 2015 · 55 posts · 29 votes
    5y

    I struggled with this same issue early on when I had my first two properties. I didn't understand how anyone could make this work! Then when I got to 8-10 units cashflow more than covered repairs each month and I felt like it was paying for itself.

    Right now think about trying to minimize repair risk. For instance, you mentioned a refrigerator going out. I stopped putting refrigerators in my units several years ago and I have the tenant provide their own. (In a higher end rental I would still provide one but not in a mid to lower rental priced unit.)

    Don't give up! I promise it gets better if you stick with it.

    3Reply
  • Ben Waldman
    Member since 2020 · 4 posts · 3 votes
    5y

    @Tony Link - Great idea. I’ve been renting properties for decades and never considered the avoided cost of having the tenants own the appliances. I think the next time I turn a property I’ll give the refrigerator to the incoming tenants and tell them that the maintenance and repair is on them.

    2Reply
  • Nattapon Permchom
    Investor · Columbia, SC · Member since 2010 · 30 posts · 6 votes
    5y

    @Adam Martin yeah, sound crazy but true. Out of my 6 properties. One year I replaced 2 bad fridges back to back then the next year 3 hot water heaters in a row. One year 2 Hvac in the same year.

    0Reply
  • Ryan Keenan
    bethel, CT · Member since 2015 · 335 posts · 57 votes
    5y

    @Elijah White

    I have a cesspool that just went out and have to replace with a septic system all while under contract on another property. I feel your pain. Keep pushing through. My 2 cents.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Dennis Wayne:

    Part of the fun no one talks about ! You can take 8% for caped which is 17.37$ and then the 4500 furnace dies lol owner financing is much better than rentals because you get to strip the equity , good cashflow , and no repairs or capex . Most cashflow is a fallacy long term because eventually the hvac dies or it needs a 8k roof or new carpeting etc . Do the math long term and you’ll realize it’s better to be the bank . An actual apartment house ,well that’s different

    while I strongly agree in be the bank.. being a mortgage banker myself LOL..  however I think what most folks miss is the numbers up front are usually not right..  napkin math for pretty much all of this 30 to 100 year old stock is 40 to 50% of gross rent will be used for the care and feeding of the unit.. so out of the remaining 50% you pay your mortgage  and whats left over is your positive cash flow.. some years you will do better some years not.. 

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    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Bill B.:

    The age probably has something to do with it. Probably some deferred maintenance by a seller who knew he was selling and wouldn’t get more money if he fixed the problems first. People are buying those homes to live and so they’re paying the same repairs and they aren’t able to deduct them from their taxes like you will. 

    Hopefully the bleeding stops soon. At least it appears you bought near where you live so you should know the neighborhoods and likely expenses. (As opposed to someone from an area where everything is much newer and we don’t deal with weather.)

    Keep track of your expenses and watch to see if hopefully they don’t decline after 6-12 months of ownership. 

    this is why when its all said and done I am very bullish on Vegas.. even though pre lim numbers dont hit the rules that are bandied about on bP when U factor in age  type of construction and weather and TAX's  returns are as good if not better than many other areas of the country and you have from my cheap seats what I think is going to be a never ending demand from SOCAL residents moving out looking to lower tax burden and much nicer home for the dollar.. 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    3Reply
  • Daniel SmythPro Member
    Rental Property Investor · Rockford, IL · Member since 2019 · 471 posts · 342 votes
    5y

    @Elijah White

    That's money in the bank, and since you are managing the work, you are in control of the repair quality!

    Keeping records on what parts you buy that may have a lifetime warranty, will gain you some free parts in a few years too. Just don't expect that free faucet part the manufacturer sends you to be there at 2am on a Sunday morning when the kitchen decides to become your new shower!

    Preventive maintenance is done best as a plan.

    Budget for it with part of that cash flow.

    As well, set up some time this spring to look for other issues on your properties.

    Say the furnace looks rough. Going to wait until the pipes are broken to find your tenants moved out and now you need to fix things with NO cash flow?

    Thats the way I used to live. When the junk hits, it hits when you least want it!

    Things will get better.

    [email protected]
    0Reply
  • Bryson DeckerPro Member
    Investor · Wichita, KS · Member since 2017 · 4 posts · 1 vote
    5y

    I am a native here and invest in Wichita KS. If you are considering trading these up and selling please keep me in mind. I'm looking to buy more.

    0Reply
  • Ron Fletcher
    Leclaire, IA · Member since 2016 · 161 posts · 130 votes
    5y

    @Elijah White

    You don’t mention how long you’ve owned the properties but in my experience it takes about a year to “stabilize “ a property before the repairs get a little more reasonable. Think long term and it’s less frustrating.

    1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    Like chin and jay said. In some places 10% of rent isn’t enough and you might need $300. Where as in Vegas 10% would be overkill as would $300. Here’s it’s closer to $100/mo, probably less. So closer to 6% on a $300k house. 

    This is a by the 1% rule doesn’t compare market to market. People on the way coast pay insane insurance. People in Texas pay insane property takes. 40+ states take out income tax. 

    0Reply
  • Account Closed
    Member since 2020 · 12 posts · 7 votes
    5y

    Everybody on this site knows how to swim and can tell you how to swim ( giving you examples of how they learned how to swim). If you can afford to get through this bad beginning financially, you will be all right. I look at my rentals as someone else is buying me a house. If I needed cash flow every month I would get out of the water. It will be no time before you are an Olympic swimmer. Good luck.

    1Reply
  • Justin Bullock
    Specialist · Jacksonville, FL · Member since 2017 · 12 posts · 5 votes
    5y

    @Elijah White

    Hey, Elijah, your questions here helped prompt me to write another forum.

    Here are the key insights I can help provide in regards to your questions. As others stated, it’s not about the age of the property. It’s more about how you manage all of these collective factors:

    Conduct routine property inspections, schedule routine maintenance items in advance, shop property insurance and home warranties, inspect and factor in budgets for updates for new assets you wish to acquire, account for what homes you own which you may want to liquidate, hire reputable contractors and effectively manage them, and be sure to keep capital in reserves.

    Here is the full forum I just posted to outline the above info in more detail for you regarding items to consider based on the position it seems you may be in.

    Hope this helps:

    https://www.biggerpockets.com/topics/925358

    0Reply
  • Ryan Malcolm
    Accountant · Los Angeles, CA · Member since 2020 · 4 posts · 1 vote
    5y

    43 responses and not one person mentioned home warranties. Interesting...

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y

    The magic spreadsheets fail again...most useful advice I can give you is to buy some Vaseline for the butthurt and Bio-Clean for the newly unclogged sewer line. And maybe figure out how to.take down a small tree in sections with a pole saw, a couple no-skill guys working for $15 per, some rope, and gasoline for the stump. But you got a nice deal for $1050, sounds like.

    And home warranties are for total suckers in this game.

    2Reply
  • Ryan Malcolm
    Accountant · Los Angeles, CA · Member since 2020 · 4 posts · 1 vote
    5y

    @Jim K. Would the property owner be better off had he bought one?

    0Reply
  • Lee Bell
    Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
    5y

    Home warranties are nice for a seller. And that's about it.

    Things do come in threes.

    I the middle of the 1 week process of getting a new roof on our home, the furnace broke and needed repair and the water heater died and needed replacement.

    Lastly. I wish we could have got an $8,000 roof. But apparently back in 1956 when the house was built and rock and roll was young they just used boards spaced apart and put wood shakes on for a roof. So, we needed plywood all around. The roof of 24 squares was $17k. Yes I know we are a high cost area. Permits were only abut $250, so not a big expense. Could have easily paid another $5k, but I shopped around.

    0Reply
  • Justin Bullock
    Specialist · Jacksonville, FL · Member since 2017 · 12 posts · 5 votes
    5y

    @Ryan Malcolm

    I did right above you there. Home warranties are a great strategy.

    0Reply
  • Eric Mcginn
    Real Estate Investor · Chico, CA · Member since 2016 · 248 posts · 105 votes
    5y

    Frozen pipe means you found the area to insulate better so it won’t happen again 

    If you aren’t sure about your water main/ sewer main get insurance for $10 a month. 

    Roofs leak and heating systems need maintenance. 
    water heaters don’t last that long but fridges usually last forever. 

    Get those things under control and it should be easy street again. 

    0Reply
  • Joni Chin
    Honolulu, HI · Member since 2020 · 44 posts · 39 votes
    5y

    @Elijah White

    We have a 80+ yr old house in Oregon, that we bought in 2016 as is. We had to put in some expected repairs (electrical/plumbing) as well as very unexpected repairs (sewer line collapse/back up, emergency bathroom repairs including a new toilet/floor and subfloor/new fridge/new water heaterI think we spent 20k + that first year! It was a money pit! But since then it has appreciated close to 100k, it’s been cash flowing, with nearly zero vacancy (just two weeks max between turnovers) and other than some maintenance and small repairs over the last 4 yrs all the major stuff has happened already so I’m not complaining now. Of course today when my new tenants moved in I found out a storm had passed through last night and there are large broken branches everywhere including one that crashed through my neighbors fence! So $h$t does happen but it’s been positive cash flow, appreciation, and tax deductions we wouldn’t otherwise have. :)

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Joni Chin:

    @Elijah White

    We have a 80+ yr old house in Oregon, that we bought in 2016 as is. We had to put in some expected repairs (electrical/plumbing) as well as very unexpected repairs (sewer line collapse/back up, emergency bathroom repairs including a new toilet/floor and subfloor/new fridge/new water heaterI think we spent 20k + that first year! It was a money pit! But since then it has appreciated close to 100k, it’s been cash flowing, with nearly zero vacancy (just two weeks max between turnovers) and other than some maintenance and small repairs over the last 4 yrs all the major stuff has happened already so I’m not complaining now. Of course today when my new tenants moved in I found out a storm had passed through last night and there are large broken branches everywhere including one that crashed through my neighbors fence! So $h$t does happen but it’s been positive cash flow, appreciation, and tax deductions we wouldn’t otherwise have. :)

    YUP we are having an Ice/snow storm.. here in the metro area 300k with no power :( 

    last storm my power went out this storm we are OK.

    this is a classic example of why U NEED to buy property that has a good likely hood of going up significantly in value. the money is made in apprecaiton over time.. cash flow is a place setter and used to pay debt.. anything left over is just crumbs..  at least for the average investors with a few rentals.. my suggestion is to find great markets and break even.. dont risk non appreciating markets because you think you need to make 150 to 200 a month.. and in those same markets if you just buy nicer assets they will do better as well.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    3Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Elijah White

    The age of the property shouldn’t matter much. You get a good one, or a bad one wether they were built in the 1890’s or 1990’s. 2 of mine are about 1900, I spent $300 on one in the last 1.5 years on a plumbing repair and $40 on the other.

    Next year could be thousands..

    1Reply
  • David Avery
    Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes
    5y

    Did read every ones post,  But please next time buy a home warranty.  Unless you can do the work yourself!

    0Reply
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