If you have a property with tenants then it means your property is going to have wear and tear and ultimately maintenance will be required.

Maintaining a property can take some work, but with good planning and budgeting, it doesn’t need to be a stressful experience.

The first starting point is building a property maintenance plan.

Planning your expenses

The best way to make sure you’re prepared for the regular maintenance that is required is to make a list of all the regular maintenance that is required and then add in the larger works that also need to occur every few years.

While things like maintenance occur each year, larger items like new hot water systems, fresh carpets or even things like roof repairs are all likely to be needed at some point. Start by building a budget and then annualising the payments for the larger capital expenditure.

The other thing to consider is the type of property you own. A freestanding home is going to have a lot more expenses than a unit. However, a unit that is under a strata will likely have some type of body corporate fees that go towards the regular upkeep and maintenance of the property and grounds. Oftentimes will cancel each other out in terms of maintenance costs.

The advantage of the strata is the body corporate or management will take care of most of the organisation for work on the building. However, the landlord or property manager will have to organise the work on a freestanding home.

Maintenance

Property maintenance includes all the ongoing operating expenses that are required to maintain the property's condition.

A good starting point is to conduct an initial inspection to survey the state of the property. This is also something a property manager will do at the end and conclusion of a lease. It’s also worth conducting regular assessments of the state of the property and determining where you will need to spend money.

Property owners are responsible for replacing items subject to natural wear and tear, outdated locks, bolts and furnishings.

Some examples of property maintenance expenses include painting, landscaping, swimming pool maintenance, air conditioner filters and repairs, pest control, plumbing or electrical repairs or appliance breakdowns.

It’s also crucial that the property owner understands the difference between fair wear and tear and tenant-induced damage. It’s always best to try and collaborate with tenants to address maintenance concerns and build positive landlord-tenant relationships.

Capital expenditure

Capital expenses focus on enhancing the property's condition and extending its life rather than maintaining it.

Unlike maintenance expenses, capital expenditure is an investment in the property, contributing to its long-term value.

Items like plumbing, appliances, heating and air-con systems, flooring, roof replacements and major renovations fall under capital expenditure. Property owners should plan for the lifespan of these expenses and budget for their replacement or upgrade accordingly.

There are also differences in the way these costs are treated for tax purposes. Capital expenses are typically depreciated over a period of time. Whereas maintenance is claimed on the year that the work is undertaken and paid for.

Budgeting

The best way to allow for the costs of both capital expenses and maintenance is to allow for it in the budget.

You will need to go through each item on a line-by-line basis and estimate the costs that you think you will incur each year for ongoing maintenance. Then you will also need to factor in what capital expenses are likely going to be over the next 10 years and come up with an annual figure to put into the budget.

On top of that, you need to ensure you have enough of an emergency fund put aside for things that you didn’t account for.

Other methods of budgeting are more broad but can still work.

The 1% rule suggests that annual operating costs may take up to 1% of the property value per year.

While the 5X rule is calculated by multiplying the monthly rent by 1.5 to find annual maintenance expenses.

Maintaining the property is key

While no one likes spending money they don’t have to, maintenance and capital expenses are a key part of not only maintaining the value of the property but also adding to it. Over time a well-maintained property will be appealing to renters and when the time comes to sell, it will also be more sought after by buyers.