Why is a Maintenance Budget so important?

Read time: 2:30 mins!

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An area you may have discussed with your Accountant or Financial Advisor when purchasing the property is outgoings and maintaining the equity in the Property during the time you own it.

Outgoings would include the mortgage, insurances, rates, water and possibly body corporate fees.

General maintenance is pretty much a given. It is where things are repaired during the course of the tenancy but what you may not have budgeted for were things like a preventative maintenance program or the upkeep of the property to keep it fresh and modern and continue to attract market rent. These areas would include paint work and floor coverings. A general rule of thumb for budgeting for routine maintenance would be $1,000

It is also recommended to be prepared for unexpected maintenance like the replacement of a hot water system, dishwasher or excess on insurance claims.

A preventative maintenance program would include regular maintenance on the roof, gutters, keeping trees cut back to prevent storm damage, keeping gardens to a minimum to prevent an infestation of termites, servicing electrical appliances and the like.

Maintaining the equity in the property or considering replacement costs is more of a long term budget of say 5-10 years.

Some areas would include internal and possibly external paint work, upgrading the floor coverings, window coverings, upgrading electrical appliances, or installing energy efficient devices.

Finally, as  an Investment Property Owner expect to be out of pocket. While you would like to think the tenant is responsible for their share of the cost of any damage it may not always be possible to claim the full amount.

If there is a residual amount above and beyond the bond you may need to consider if it is worth your time and effort to seek a claim from the tenant or to simply allow the debt to be absorbed in your maintenance budget.

The advantage of an excellent property manager as opposed to a mediocre property manager is that they will understand the financial aspect of the property. From rental return, to general and preventative maintenance programs to insurance claims to the value in maintaining and growing the equity in your investment an excellent property manager will know, understand and guide you to better returns.

Finally, there may be improvements to the property to budget for to ensure the property remains attractive to the consumer being the tenant.

These areas would include installation of ceiling fans or air conditioning, security screens, installing an outdoor covered area over the back patio. There is also the option of solar panels or water tanks. For any improvements you make to the investment property it is wise to discuss this with your Accountant.