What to repair, how much to spend, and when to do it: 4 types of maintenance
September 1, 2010
“What maintenance you do on a building depends a lot on when you plan to sell it or how long you expect the tenant to stay. You need to look at three things to decide. First, look at your routine and preventive maintenance schedules. How do they coincide with the maintenance you are thinking about doing.
Second, look at your property ownership plan. When you bought the property, you should have had an idea of how long you intended to keep it, what you intended to do to it and with it before you sold it, and what you considered a reasonable amount of money to spend to accomplish the plan.
Finally, look at your budget for the year. Haven’t made one? Join the club, most landlords haven’t, but it can help you immensely in taking control of your property. Figuring out what you will spend on the different aspects of managing a building is of incalculable value in the planning process.
There are four kinds of maintenance: preventive, corrective, routine maintenance and new construction. New construction has two subcategories, cosmetic maintenance and upgrading.
Preventive maintenance is simply ongoing care. What you are doing with this kind of maintenance is preserving the physical integrity of the building. Mostly it involves walking around and through the property to discover potential problems before they become expensive. The result of preventive maintenance is corrective maintenance.
Corrective maintenance is nothing more than fixing things that are broken. Repairing leaky faucets, broken windows, broken furnaces and balky locks fall under this category. These are the calls you get from tenants saying something needs fixing.
Routine maintenance is the scheduled stuff. (Sometimes the definitions for it and “Preventive Maintenance” are reversed.) Cleaning the gutters once or twice a year, picking up litter in common areas every day, lawn mowing, parking lot striping, and fence painting all fall under this category. Routine maintenance could well cut down on your corrective maintenance costs. But it can be a huge budget item: in a commercial building, for example, routine maintenance can swallow up 18 percent of the budget. Here is where you can think about how to save money on maintenance. You will always have to do the corrective maintenance, but routine maintenance can demand more or less of your money, depending on what you plan to do with the property. So one tactic to save money would be to wait and only fix things when they need it.
New construction is a category of maintenance involved with leasing and tenant relations. Cosmetic maintenance, for example, is designed to increase the marketability of a property. It includes new paint, wallpaper, light fixtures and carpeting. Upgrading is more extensive cosmetic maintenance. Here you are adding features, such as a swimming pool or another room. It increases the rental value of a property.
All of these work together in determining how much to spend on maintenance and what to spend it on.
Say, for example, that a building needs paint. Your property plan says you will be selling it next year, but your routine maintenance plan says it’s time to paint. The building says it’s time to paint, too. Paint is chipping and peeling on the south side and on a few other spots. But the rest of the paint is in pretty good shape. It will certainly last several more years. You need to ask yourself why you would want to spend money painting the entire building when you’re just going to sell next year.
Think about roofs the same way. They usually go bad on one side first unless they are flat roofs and require repair annually. Lots of times you can get away with repairing only the bad side.
New carpeting is another example. If your tenant’s lease is going to run out soon, and you know he or she has no intention of renewing, or you have no intention of renewing, why put in new carpet? Re-carpet and paint after the tenant moves out.
Take a different scenario. Your building needs paint, you have no plan to sell the property in the foreseeable future, your maintenance schedule says it’s time, but you didn’t budget for it. What do you do? You have to consider another factor. Do you expect any vacancies in the coming year? If so, you’ll probably have to find the money to paint the entire building. Good tenants like to rent well-kept properties. If yours is showing signs of wear, such as chipping and peeling paint outside, in order to get the highest rent, you’ll need to paint. There’s no point in just doing touch up if next year you’ll need to do the whole thing anyway. If you don’t expect any vacancies, budget for and schedule the painting for next year. Tell your tenant(s) you plan to paint and when you’re going to do it so they can plan to make things easier for the painters. Telling them your painting plans allays concerns they might have about the maintenance of the building. There are several other scenarios that evolve from the three factors and the type of repair or improvement to be done. It’s all just common sense. Just remember the most important factor in all this is your customer. What kind of customer are you trying to attract or keep in your rental property? If it is prime tenants, then the first question to ask yourself is how is my doing or not doing this repair or maintenance item going to affect my customers? The rest of the considerations take second place.