Most landlords dread rental property repair and maintenance. This is one area that causes otherwise would be real estate investors to stay away and that’s sad. If you do it right, there should be little concern that you’ll be bogged down in rental repairs.
In these blogs we discuss how to purchase, own and operate rental property in the Dallas, Fort Worth metro area. If you are new to these blogs please read “Getting Started” and “Getting a Mentor” pages first. We teach you a method from start to finish. It is essential that you understand the benefits of each step in the method before you pick and choose just some steps to follow and others to skip.
For example, just this post about how to deal with repairs and maintenance assumes that you have followed the rehab steps described in earlier posts. If you perform a correct rehab as we discuss there, your rental repairs and maintenance should be a minimum.
Let’s talk maintenance first. Maintenance is what you need to do to avoid repair. For the most part the lease contract will call out maintenance to be a tenant responsibility. These should include most replaceables like light bulbs, filters and batteries, maintaining the lawn and landscape, swimming pool if you have one and watering the foundation. The lease must require the property to be kept clean and clutter free at all times. As a landlord you should drive by the property perhaps once a month to make sure that the exterior is well maintained and the foundation is watered. If maintenance issues are found, take a picture of the condition and send them a polite letter requiring them to fix the condition. Quote the section of the lease that requires them to maintain the property. If your property is in an HoA, the HoA may send you a letter if they notice any violations like tall grass or weeds in the flower beds or parking code violations. The letter will most likely be addressed to you and delivered at your address. Hide your personal details, copy the letter and send it to your tenant. Have them advice you as soon as the condition is corrected. As we discuss in the post on tenant selection, how well your property gets maintained largely depends on how good you were in selecting your tenants.
Now let’s talk repairs. There are a few ways to slice this. First, you have essential and non-essential items in a house. For example, the bird feeder in the backyard could be considered non-essential. The A/c in a Texas summer would normally be considered essential. A stove or oven would be considered essential. What’s essential is not obvious. It depends on the type of property and rent amount collected. What’s required by law will be stipulated in the lease. For example, security instruments like locks are certainly essential. Utility access would be considered required by law.
The next division is based on who’s at fault? Who caused the breakage? If the condition was a result of abuse, overuse, neglect or accident by the tenant, then the tenant would have to pay the full cost of correcting the condition. If the fault is due to landlord’s negligence then landlord would have to pay the full price. Now, it may not always be clear who’s at fault. Nothing lives forever, even under proper maintenance. If your tenant selection is good, your tenants will own up to things they caused and will offer to fix it or pay to get it fixed. If you selected good tenants and they submit a repair request, take care of it. Get the fix scheduled as soon as possible. If it’s something to do with electrical, plumbing or HVAC get a licensed professional to fix it. When a property is in service you may be required by city code to only let licensed professionals address the repair. If it is a fence panel or fallen doorknob or minor items like that then you can get a handyman to fix it. We discuss how to get and keep good contractors in one of our earlier posts.
Using Warranty Companies: If you have an older property, having a warranty program where the company will come and fix items such as HVAC, electrical, plumbing, appliances and some other issues could be beneficial. Warranty companies usually have a monthly premium charge of about $30 and a per issue service charge of $60. Having a warranty company helps in converting unknown variable costs into predictable fixed costs and may provide better control over your business. If you are using a warranty company and default to fixing things rather than replacing things, then you should fund a deferred maintenance account as items will need replacing at some point down in the future. Warranty companies may replace an item if it can’t be replaced and that’s when you really get the bang for your buck. You can get a new internal A/c unit for $60. Rest assured however, they are going to try to fix it first.
Best way to schedule your contractor or a service provider from a warranty company is to give them the tenant’s contact information and let them handle the scheduling between themselves. Get authorization from your tenant that you can provide the service provider with their contact information first. You can do this either in the lease itself or you can do this in the repair request form. Make sure that payment for the service is handled independently and the tenant is not involved. The service provider or contractor must know that they cannot invoice the tenant, leave an invoice at the tenant, collect money from the tenant or otherwise discuss details beyond what’s needed to fix the specific issue at hand with the tenant. Read the post on getting and keeping good contractors. You do not want your contractor to be “chatty”, telling your tenant how their property was “trashed out” at purchase and he fixed it all up.
Handling the disconnect between essential and non-essential items: Sometimes the bird feeder in the backyard could be of great interest to your tenant. If that breaks you may just want to remove and dispose of it but your tenant may want to have it fixed. To handle conditions such as this you can require in your lease that tenant pay up to $500 or so for every condition that needs repaired. Granted that may sound steep but note that if it’s not their fault and it’s essential in your opinion (or in most reasonable minds), you are fixing it at no cost to the tenant. The $500 is only applicable for situations where the item is really not essential but your tenant would really like to have it. Your lease must clearly state that in any event, items repaired or replaced is the property of the landlord and will remain at the property when they leave.
So, get a good property at a great price, get someone to loan you the funds for purchase, closing and rehab, do a through rehab, market it widely, execute a through tenant selection process, setup a home warranty and you are most likely to enjoy a decent cash flow every month and till it is time to rent it out again, it will be truly a passive stream. Doing it right matters, so get a good mentor first.