Far West Realty - Rentals and Propery Management in Prescott
 

The Rental Cycle of Life: Step 2 - Maintenance

Property Maintenance is the second step to rental properties in Prescott AZ

Item 2 on Far West Property Management’s Rental Cycle of Life, is Maintenance.  I know that real estate investors are ultimately concerned about one thing with regard to their rental properties:  ROI (Return on Investment).  They work hard, and often long, to get to the point where they can buy a rental income property in Prescott and when they find it, they make every effort to buy it right – right property, right location, right terms, right price.  

Most investors will have done the numbers before making the offer, and will have made allowances in calculating a projected ROI, for expenses that will be necessary in operating the property.  Often, though, we see less-experienced rental investors who don’t allow enough budget for keeping their investment in good condition.  Most understand the idea of having a margin of profit between their incoming money and their outgoing money.  Not as many have a good feel for what that margin should be.

It is not uncommon for me to be approached by prospective clients who want me to manage a rental for them that has a projected rent rate of say, $1000 per month. Then they tell me that they are servicing a mortgage of around $850 per month, including taxes and insurance.  After a few more questions I learn that the unit is 40 years old and hasn’t had a new roof at all, or a new heating and air system, water heater or exterior paint job within the last 25 years.  

Then it is necessary for me to help them understand that because of maintenance and upgrade it will almost certainly require, as well as other expenses, including my fees, they won’t be able to break even on this investment, let alone realize positive cash flow or any ROI.  Often such prospective clients may have inherited such a property, or perhaps it has been their primary residence, which they now have to vacate due to a job change or other such unexpected event.  They often want to rent it out to avoid selling at less than they want, or think it’s worth.  In any case they often have little or no experience in real estate investing.

A few general “rules of thumb” can be helpful in such situations:

Typically, the newer the property, the less immediate maintenance or upgrade it will need.

The more continuously and regularly it has received preventive maintenance, the less likely it is that major expenditures will be needed in the short term.

Based on the above two items, I recommend somewhere between 30% and 50% more than the fixed monthly expenses should be a minimum monthly rental rate on a well-maintained and/or newer property. And, of course, the property would need to be worth that on the current rental market.

So, you might think that for an article on item two of Far West’s Rental Cycle of Life, i.e., Maintenance, we’ve spent a lot of time talking about Return on Investment. Well, you’re right, and there’s a good reason for it.  Basically, it’s this:  Sooner or later, in one way or another, the amount of return on your investment is going to be impacted, for better or worse, on the care your investment has received over time.  It’s just like when your mechanic tells you that the more regularly and reliably you change the oil and filters on your vehicle, and provide it the recommended maintenance at the appropriate times, the longer its life will be.  It’s true of the car or truck, and it’s true of your rental investment property.

A lot of folks flinch at spending the money necessary to keep up with the needed maintenance on a property, thinking that it is cutting into the money they receive for the month.  And, it’s true it does diminish the net income for that month.  But, the truth is, it is most likely saving them a lot more in future costs and preserving, if not increasing the value of their investment.  The bottom line is, a wise investor must factor maintenance costs, especially preventive maintenance costs, into the formula for ROI on a rental property.  Failure to do so can make it a recipe for disaster instead of a formula for success.  For more information about what Far West Property Management can do to help you with your rental investments, call Dave Hamill at 928-772-9400.

For more on how we can help you manage your rental properties, contact us today!

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Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars We have very much enjoyed our apartment as renters with Far West Realty for several years now, and are happily satisfied in our dealings with Dave Hamill and his staff. The very few concerns or problems we have had with our unit have always been met with real consideration and responsiveness. Further, Dave and his staff are readily accessible and always courteous. Tammy and Jim
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars Working with Far West has been a pleasure. Dave and his office were responsive to questions and needs throughout my three years leasing from them.
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars Dave Hamill at Far West Realty was my property manager on a single family house for several years. As an out-of-state owner, I relied on Dave for everything: tenant selection, lease negotiation, recovery when a former tenant didn't pay the last month's rent, cleaning, maintenance, marketing, managing repair work, etc. Dave and his team were always professional, courteous, competent, and just nice people. I wholeheartedly recommend them!
Far West Realty in Prescott AZ - Homes for Sale | Buy Land | Property Management
5 out of 5 stars I have been using Far West to manage my rental in Prescott Valley for approximately 7 years. I live out of the area know that things are being taken care of. I have complete faith in Dave and his team in the oversight of my property. They are thorough and very prompt in any given situation. I love the fact that I know that the house is being taken care of with TLC. You can't put a price on piece of mind and that is exactly how I benefit from using them. I would strongly recommend using Far West for your management needs. You will not be disappointed.