Better Understanding Rental Property Repairs

It’s no secret that when things get old, they break. This typically holds true in the rental industry. In general, older properties are more of a liability than newer properties when it comes to maintenance. In this article, I will discuss the warranty percentages of older rental homes and how you should go about managing these older rental properties. 

Older Homes and Warranties 

A while ago, I looked at warranty percentages based on the age of houses, and I broke the data into two categories. From these categories, I can better understand how to manage my own properties—which ones I should look at selling, which ones I should keep, which ones may have approaching issues, etc. This is what I discovered: 

  1. Houses that were 5 years old or younger had an average, annual maintenance expense percentage of <2% of gross rents
  2. Houses that were 10 years old or older had an average, annual maintenance expense percentage of about 10% of gross rents

Simply put, once a house hits the 10-year mark, it’s likely to be more expensive to keep. As your rental house gets older, for example, there are several items that you will need to start checking on a regular basis or potentially replace: 

1. Water Heater 

The reasonable life expectancy of a water heater is about 10-12 years. If you’ve used a water heater for 10 years, you’re probably better off replacing it before it starts to leak or floods your house. Rather than being concerned about the potential cost of a water heater going out, it may be more helpful to be concerned about the potential cost if your water heater breaks and floods the house. Such flooding can lead to flooring replacement, tenant relocation, rent loss, etc. 

2. HVAC Unit

HVAC units typically last 10-15 years. Both the exterior part (condenser) and the interior parts (air handler and AC coil) will likely need to be serviced/replaced after 10-15 years. These parts may last a little longer if you regularly maintain the system. Simple maintenance, like changing the filters, can have a big impact on your system’s longevity.

3. Appliances

Appliances are more difficult to predict. I’ve had some appliances that have lasted 20 years, and I have had some appliances that go out after 1 year (just after the warranty expired). I think it’s a good idea to be prepared to replace appliances in homes that are more than 10 years old. Appliances, in general, are more disposable today than they were a generation ago, and repairs are frequently not an option. I’ve found that washing machines especially are more subject to needing replacements, therefore, I’ve chosen not to provide them in any rentals. Some appliances may last longer than others, but it’s still a good idea to budget for a 10-year expectation. If appliances last longer than this, then it’s a win for your budget! 

4. Flooring

Flooring will last just as long as the tenants take care of it. Ironically, I’ve had some long-term rentals with one tenant, and we’ve never had any flooring issues at all. The tenant keeps the floor clean and well-maintained, and it’s lasted for a decade and will probably last another decade without any issues. On the other hand, I’ve had some tenants who destroy the flooring after only a few short months of renting. I think having the expectation that you will need to replace flooring from time to time is just part of being in the rental business. Don’t freak out if the renters you thought were taking great care of your property are also using a spare bedroom as a dog park. In any case, if your flooring lasts 10 years, that’s a pretty good lifespan, and you should be happy with that.

5.Roofs

Although most roofs have a 20-25 year warranty, I’ve seen some last a much shorter period when they’ve been subject to weather damage. I would encourage you to walk your property at least once a year and evaluate the condition of the roof. Recently, I was working on a project where we had to be on the roof to do some work and just being up there caused significant damage. The roof was old, and we ended up replacing it once the work was complete. When you’re inspecting your roof, make sure that all of the flashings are secure around penetrations and still make a proper seal, as they were designed to do. Make sure there are no shingles missing and that the asphalt shingles are still in good condition. Hail and weather events can easily pit or damage shingles if severe enough. If such weather damage is involved, insurance companies will frequently cover damage or repairs. In your specific situation, it would be worth making a call to your insurance agent to discuss coverage policies. Overall, it’s not uncommon to need a roof replacement after 15 years.

6. Washing Machine Hoses

Washing machine hoses should be replaced every 3-5 years. Personally, I’ve known many people whose homes were flooded when a washing machine hose ruptured. Stainless steel hoses are much more durable than the traditional rubber hoses and typically have a longer lifespan. While you may not own the washers in your units, I think it could be a good idea to encourage your tenants (especially long-term tenants) to have washing machine hoses replaced. 

7. Faucets

Cheap facets often lead to problems. Faucets that are not tightly mounted or have poor design integrity can flood a house and cause thousands of dollars in damage. Personally, I think it’s always worth installing a name-brand faucet that has a good reputation. Name-brand parts are easier to get, and they typically last much longer than their generic counterparts. Some faucets will last decades, while others will have very short lifespans. The quality of the faucet you originally install definitely impacts the expected lifespan. I’ve had several situations where tenants regularly broke handles or spouts off of faucets (I would consider this tenant abuse), and we needed to perform repairs accordingly. More or less, I would not count a tenant’s abuse in the overall calculation of the feature’s lifespan. In general, it’s reasonable to expect 10+ years out of a faucet before it needs to be replaced. 

8. Paint

At some point, you’re going to need to discuss repainting the interior and/or exterior of the unit. I personally think painting is one of the least expensive, highest-impact improvements for a rental property. A fresh paint job communicates that you care about the property and that it’s nice and clean for a new family to move into. I think a well-painted unit is easier to get higher rents out of and preserves your reputation as a landlord with good rental properties. At a minimum, I would recommend painting as needed between renters, and I would be mentally prepared to paint entire units (those that turn frequently) about every 5-7 years.

As this list proves, older homes require a larger maintenance budget. If your rental property is aging, or if you’re buying an older home, you’ll need to budget more to prepare for repairs and replacements. Unfortunately, that’s just part of the reality of buying an older home. 

Here’s a personal example of what not to do: when we first got started in rental property and purchased a few older homes, I budgeted a 3% maintenance setback, which ended up not being enough. I ended up making a lot less money due to higher maintenance costs. So, if you find yourself purchasing an older home, I would recommend putting about 8-10% of your gross rents in a maintenance setback. As part of your due diligence before you purchase a house, you may also want to check the age/conditions of the items I listed above. In some situations, a home warranty might be worth checking out (though I try to steer clear of them). 

Managing Older Homes

After you’ve purchased an older home, or as some of your rental properties begin to age, there are a few important things to keep in mind as you manage those units.

First, have a proactive mindset. We’ve had a few houses with broken faucets or water heaters that have flooded the home. Every time this happens, we wish we would’ve replaced the aging item a month earlier. This replacement schedule is possible if you think ahead. If you have older properties, conduct an annual inspection and keep an eye out for potential issues. This proactive mindset can save you a ton of money in associated repairs and can save you the potential loss of rent. 

Second, try to schedule repairs in between tenants. If you see that you have an older home in need of repairs, you may want to consider executing those repairs during the house’s next cycle. If you have a gameplan for preventative maintenance, you will (hopefully) save yourself from an emergency situation. If your unit is in good working order ahead of time, your tenant is more likely to have a great renting experience. 

Lastly, track your warranty as a percentage on each of your houses. As you look at your properties each year, warranty percentages can help you make long-term decisions. Perhaps you have an older home with approaching maintenance and you decide it’s a good time to sell. Or you may decide to conduct a massive remodel on an older home so you can keep it for another 10 years or so. Again, between 10-15 years is when you will experience a lot of maintenance, so keep this in mind as you manage your units. 

In Summary: 

  • Understand that homes become more expensive to maintain the older they get. Keep an eye on the 10-year mark for major replacements and repairs. 
  • In general, budget 8-10% of your gross rent for maintenance fees on homes 10 years or older. 
  • Be proactive when managing your older homes. It’s better to make a repair sooner rather than later to avoid an even more costly repair. When you make repairs, try to schedule them in between tenants.
  • If you understand the warranty percentages on your houses, you can make informed decisions about when to sell properties and/or when to remodel properties.