A well-managed investment property can result in a steady stream of income, but it’s certainly not without its expenses. Therefore, it’s essential for landlords to correctly budget for rental property maintenance to cover these costs. Doing so can ensure you always have enough to cover your expenses and avoid debt.
But how much rental property income should landlords budget for maintenance? There are a few different formulas you can use to determine how much you should have set aside for preventative maintenance, emergency maintenance, and seasonal maintenance of your property in Northern Virginia.
1% of the Property Value
Having 1% of your property value saved annually for repairs is a good place to start. This means if your income property is worth $500,000, you would have $5,000 set aside for maintenance and repairs. While this amount won’t be enough to cover a new roof or septic system—things your property insurance may help cover—it will help cover everyday maintenance and emergency maintenance items that you may need to pay out-of-pocket for.
50% of Your Rental Income
Another formula to use is to expect that you will spend about 50% of your rental income for expenses related to the property. These won’t necessarily be maintenance expenses, but the point is that not all of your rental income is profit.
Expect about half of your income from renters to go towards:
Regular and emergency maintenance
Property taxes and insurance
Waste management
Pest control
Landscaping or exterior maintenance
HOA fees
So if you make $1,200 a month in rent, set aside about $600 of this for property-related expenses. This would also translate to $7,200 annually.
$1 Per Square Foot Annually
You can also use the square-footage rule, which stipulates that landlords should have $1 per square foot saved for maintenance annually. So if your income property is 1,500 square feet, you would have $1,500 saved for maintenance every year. However, keep in mind that using this rule doesn’t account for inflation or rental increases that can impact how much maintenance and related materials cost over time.
Multiply Your Rental Income by 1.5
You can also multiply your monthly rental income by 1.5 and have that amount saved for repairs for your income property every year. For example, if your rental property nets $2,000 a month, that means you’d have $3,000 put away for maintenance.
Remember That Every Property Differs
There’s no one-size-fits-all rule for how much landlords should budget for maintenance. How much you have set aside for regular maintenance and emergency repairs will depend on the condition of your property, its age, and how well your tenants care for it. Have more questions about your income property in Northern Virginia? Contact Circle Property Management today at (703) 349-0144.
About The Author
Patrick H. Page - Principal Broker | Licensed in Virginia and the District of Columbia
