To all you multiple property investors.
As I’ve down sized my properties to one dual occ.I’m wondering how you go about budgeting for your repairs of your properties?
I imagine puting ex. dollars away each month would be the right way of budgeting.
Imagine having ten properties, at a budget of fifty dollars each month.That’s six hundred dollars per year.Or six thousand dollars every year for the ten investments.
(One of the reasons I sold all my units was of the corporate levies.Money down the toilet!)
As some investors buy at the lower end of the market this would mean even more cash to your budget,more being spent on repairs.
If we use S.McK. as an example,one hundred and thirty properties(title of his book),at fifty dollars each, that’s a annual budget of seventy-
eight thousand dollars.Wow!!!!That’s mind blowing!!!
Am I missing the obvious. Or this is how it works?
Can’t wait to be eductated!bruham.[withstupid][wacko]
hi BB, I agree with you about strata fees/corporate levies and I haven’t bought that kind of property myself either.
Lower end of the market can definitely mean you buy a property with problems. That’s probably how come you got such a bargain in the first place! I have spent about 9k and 14k on a couple of mine doing complete maintenance on the whole property, total redecoration including polished floors, new fireplaces and bathrooms and vanities and light fittings and all that sort of thing. Holes fixed. Once these properties were sorted the maintenance slowed right down to what you would expect. the odd leak maybe once a year, the odd set of keys needing to be cut about once a year, the odd hot water element needing replacing, (my tip is replace the element not the whole thing, for 1 tenth of the price!) and as far as repainting or painting the roof etc I would probably budget doing that every 5 years.Basically I bought with a builder’s report and fixed up every single thing on it. Except things I was going to defer for 2 years (painting the roof.)
I would say that the maintenance budget totally depends on the state of the property and if it has been well maintained.
if the property is all good when you buy it then I reckon about 5 to ten percent of rentals a year should do it. Otherwise I would totally recommend fixing everything on purchase. OK it’s capital expenditure so you have to call that part of the purchase price really. But that way you got a quality rental property that will perform as intended. if you don’t fix stuff then yeah you could get an endless stream of problems. not to mention you won’t be able to keep tenants as they will be too sick of things going wrong with the property and the invevitable wait until they are put right.
cheers-
Minijoy to the world
Hi Bruce,
Depending upon your total situation I would prefer to have the money available to me either in an investment line of credit or redraw account so that I coould channel all the otherwise saved money into reducing some debt around the place.
And, if there are significant repairs to be made then take the money from the redraw or line of credit.
I have a line of credit set up for IP expenses including repairs or improvements.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Derek,
I’ve done the same as you, but in the last two years I’ve become a firm believer in budgeting.
Everything I now do has to be in some form of a budget.My life has become so simple due to having budgets.
My business budget, taxi driving budget,job budget,and household living budget. All through keeping budgets.
By keeping budgets I’ve eliminated the need for credit cards,etc.All bills are paid on,or before time.
I have two investment loans, and one LOC loan.
Plus a business loan(at this moment I’m running eight taxis,soon to be ten cars).
The LOC loan isn’t all that it’s cracked up to be.
Higher interest rate.It could get out of hand if your not carefull.I have too think hard before I withdraw from my LOC loan.It could be there for ever,in the red.bruham.[wacko][withstupid]
Repairs and maintenance are always a juggling exercise. I do not save for repairs though.
I have mostly positive cashflow properties. Some, which I have had for a while and have the loans paid off, now provide the extra money for maintenance. While interest rates are low, I have channelled quite a lot of money into good quality maintenance and some capital improvements.
If interest rates rise, there will be very little surplus for maintenance. Though, if I’m up to date with it all, then not a lot will need doing for a while.
In a major emergency, I have equity and serviceability enough to borrow for repairs. I dislike paying extra interest payments, so only in an emergency, or if I can gain via more equity or more rent, would I borrow.
If you want to get out of a hole, first stop digging.
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