If you’re involved in the real estate business, you probably heard the term deferred maintenance. Today, we’ll talk about deferred maintenance and whether it is bad or good for you, plus the reasons behind it.
Everything You Need to Know About Deferred Maintenance
What is Deferred Maintenance & Is It Bad or Good?
In real estate, deferred maintenance means the practice of putting off necessary building maintenance such as leaky roof repair, annual maintenance, etc., to save money or meet the budget. It is tempting to postpone essential property maintenance to save money. But in the long run, it’s not sustainable.
You may save money now by postponing property maintenance. But when you delay the property maintenance, it’ll make your real estate property less functioning, and eventually, you’ll have to pay heftier repairs fees in the future. Besides, when you postpone the necessary property maintenance, it can put your real estate investment at risk. That’s why in the real estate business, deferred maintenance is actually bad for you in the long run.
Risks with Deferred Maintenance
1. It Kills the Cash Flow
In the real estate business, maintaining a consistent cash flow is essential. But costly property repair fees can kill this cash flow and put your real estate investment at risk. For example, postponing a $2,000 home repair may sound profitable now, but it’ll cost you 10x in the future. Besides, when you defer maintenance for a long time, it’ll start to damage the structure of your property. As a result, you’ll have to pay more than the initial cost. That’s why if you want to stay in real estate for a long time, it’s better to do regular maintenance and repairs. It’ll benefit you in the long run.
2. Legal Problems
Apart from the cash flow problem, you can face legal issues if you defer your real estate maintenance.
When you’re investing in a real estate property, be prepared to spend money on annual maintenance fees. Annual maintenance like electric repairs, cleaning the chimney, deck inspections aren’t costly at all. Moreover, this maintenance keeps your real estate in good condition. But as I mentioned earlier, deferred maintenance can damage the structure of the property and put the tenants at risk.
If accidents are caused by the lack of property maintenance and tenants get injured, you’re going to face trouble in the courtroom. To avoid this type of situation, it’s better to repair your property when it’s needed.
How to Set a Budget for Deferred Maintenance
To set aside a budget for deferred maintenance, you can open a separate bank account. Each month, you can deposit $100 in that account. If you do that, at the end of the year, you’ll have at least $1200. Again, if you choose a higher interest account, you’ll be able to save more money. With this money, you’ll be able to repair your house easily. Also, it’s suggested that while buying a new property, add around $500 to your budget for emergency repairs.
