Estimating Repairs & Maintenance

2 Replies

Hi everyone -

I am new to investing in real estate and new to BiggerPockets. It seems like a great community so far and I’m happy to participate!

My question is how best to estimate repairs & maintenance costs:

Everything I read suggests taking 5% to 15% of the annual income, depending on the age and condition of the property, to estimate repairs & maintenance costs.

It seems to be a bad way to estimate costs, specifically when looking at a single-family residence in a location such as California.

For example…

a 2,000 square foot house in California that generates $54,000 in annual rent vs. a 2,000 square foot house in Tennessee that generates $18,000 in annual rent.

The houses are practically identical in size, age and condition, yet if I use 10% to estimate repairs & maintenance we are looking at $5,400 vs. $1,800. I understand that repair costs will vary from location to location, but that’s a $3,600 difference.

Would it be better to use a cost per square foot approach to estimate repairs & maintenance? Something like $2-$4 per sq. ft. depending on the location, age and condition of the property?

Thanks, Dan  

Dan depending on the area cost per sq footage is a good way to go. Always put in 15 percent contingency on your over all budget. Ivy has saved many of our clients. Lloyd segal teaches a great boot camp on this very subject and it runs all on a Saturday. You should think about attending

Dan, one thing to consider is these estimates might also include rental vacancies, which would depend on how much rent you are not collecting.  In this case, your California home (which probably has a bigger mortgage and a higher rent) will be costing you more than your Tennessee home.

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