Maintenance costs - How to minimize the costs?

Question

Maintenance costs is the cash flow killer, if it exceeds the budgeted amount. How can we reduce this risk? Should we hire a property manager to cover maintenance or purchase a home warranty plan? My concerns:

1/ Property Manager: what if he simply calls the vendors for every request without screening first? That would be very costly.

2/ Home warranty: what if they are slow to respond to the requests, which affects the tenants satisfaction.

Appreciate your insights.

Catherine

Catherine Tran · Answer

Thanks for reinforcing the point, Adam. I wish things will go well as planned as this is my 1st investment.

Catherine Tran · Answer

Thanks, Will. Those are the valid points. I would have to be selective to find an excellent Property Manager then because I'm investing out of state. I'm in escrow for a move in ready property and will rent it out asap.

Adam Martin · Answer

Also just pay the costs upfront to do it right the first time.  Sure it initially cost more but what is the point constantly fixing things that should just be replaced.  I had a home I bought with a home warranty and they fixed problems for me as they arise but it was just putting bandaids on larger problems for my heater and Ac.  I got calls almost every year for it and just now ended up replacing it.  I squeezed a couple years life but with the cost of the warranty and deductibles I should have just bought a new one sooner.  It would have saved me money and time getting the things fixed and dealing with complaints at very inconvenient timing for us both.  Morale of the story I tried to be cheap and overspent because of it.

Will Fraser · Answer

@Catherine Tran, welcome to the Biggerpockets forums!  This is a very good question, and a tricky one to be sure.  This is something my partners and I discuss constantly.  Here's what I would offer:

• If you hire a good Property Manager they should be doing more than calling random companies.  True, companies (especially in the contract labor world) are flawed and will make mistakes, but the PM should have relationships with people they've used before.
• The best way to reduce maintenance costs is to buy new construction, or buy an old home and FULLY rehab it yourself.  Those are the only two ways to own rental property and reduce maintenance costs that I've found.
• Warranty companies are a decent idea.  They WILL be slow to respond and they ARE a for-profit company whose profit it directly tied to NOT paying claims, so go into it with eyes wide open.  They have done me right a few times, and they have taken 1 month to resolve a stove issue that nearly brought me to court with a tenant.

So, new construction for the win! :)