Deferred Maintenance Will Hurt Investors in the Long Run
By Paul Esajian on January 6, 2014
The goal of owning any asset is to try to prolong its profitability and usefulness for as long as possible. This theory may be applied to any asset you currently own or intend to enjoy in the future. For real estate investors, the properties they acquire are their primary assets. Any rental income they are receiving is an enormous asset. The longer and better they take care of their respective asset, the longer they can continue to receive returns. If they stay on top of their property maintenance, they will prolong the life of their asset and avoid large costs in the process.
Deferred maintenance can turn a small crack in the driveway into an entirely new driveway. The same concept can be applied to a broken gutter, leaky faucet, old furnace and an unsafe roof. Neglecting to take a proactive approach can turn a small problem into a big one.
One of the reasons that investors fail as landlords is that they don’t plan for the future or for changes in the market. The useful life of many appliances or other items on your property has a definite shelf life. Things will break down over a period of time and you must expect them to. You can only go so long without replacing the roof, sidewalk, hot water heater or any aging item before it starts costing you money.
Investors will often get into trouble when they try to defer maintenance on things that clearly need them. If you do not have sufficient reserves put away for this very circumstance, you will either not be able to get these fixed or be forced to put replacement costs on credit. This could lead you to having negative cash flow on the property and looking for a way out. If these items are not fixed, you will not be able to rent and there will be no cash coming in at all.
In order to avoid deferring maintenance, it is best to deal with issues when they come up. You can try to get another year or two out of an appliance, as long as you have the funds ready to quickly replace when needed down the road. Look at the issue and evaluate if you are costing yourself more money by not addressing the issue now. It can be a burden to clean the furnace or chimney every year, but if you neglect this for a few years the small cost and inconvenience can turn into a real nightmare.
Anyone that owns real estate knows that issues will come up when you least expect them. It is important to have good communication with your tenants so they can openly tell you if they see any house issues that could be a problem. The sooner you take action on these or the better you plan for them down the road, the much easier it will be to handle them. Issues will happen with any property. The sooner you nip them in the bud, the better off you will be.