Before investing in real estate, it’s important to conduct a cash-flow analysis to understand your anticipated income and expenses for a given property. For new investors or new-to-the-area investors, it can sometimes be difficult to accurately predict what that cash flow will be.
As a property management company who has been professionally managing real estate in Central Ohio for about 8 years, we have access to nearly a decade of data tracking real-world income and expenses for single- and multi-family unit rentals.
On the expense side, we’ve been particularly interested in understanding just how much our clients spend on various categories of expenses – things like landscaping and snow removal, pest control, repairs, utilities, and more.
So where is the money being spent?
We conducted a study in 2019 and looked at what some of the most expensive parts of owning multi-family real estate in Franklin County are. Is it the pest control? Is it the landscaping? How about repairs and maintenance?
Our results offer clear insight into what to expect when owning real estate in Franklin County.
After evaluating our data in the aggregate, we found, not surprisingly, that the repairs and maintenance category clearly dominates all of the other areas when it comes to property management expenses. Anytime a tenant calls in with a maintenance request – whether it be a light switch not working to larger capital items like replacing a furnace – it falls into the repairs and maintenance category.
How these results inform our property management philosophy
When we look at these categories in aggregate, we find far and away that repairs and maintenance dwarfs the other areas in terms of expenses.
So, what does that mean for how we manage our properties?
For us at RL Property Management, it comes down to investing for the long-haul. When we handle repairs and maintenance in our properties, we think in terms of decades, not years. We focus on quality and reducing our expenses over time, rather than finding what the cheapest option is right now.
When you look at the invoice breakdown for repairs and maintenance work, we see that labor costs generally account for the vast majority of the expense. Given that, our approach is that if we’re going to be paying for the labor anyway, we may as well invest in higher quality materials, so the item lasts longer.
Better materials mean fewer visits from the maintenance worker, and thereby our overall labor expenses over time are reduced. If we can get a few additional years out of an electrical appliance, that’s time that we don’t have to pay someone to go out and deal with it.
What about you? Do your experiences as a property owner jibe with ours? Let us know!