Average Cost of Maintenance and Repair for Rental Houses in Metro Atlanta
One of the problems investors have in creating a good budget for their rental houses is the word “average”. Zelman & Associates, a leading Wall Street analyst in the real estate sector, surveys the major landlords and property managers around the country. According to Zelman, the large hedge fund owners are spending, on “average”, about 20% of the property’s income on CapEx items which would include new carpet, new appliances, new roofs, and any other major expenses.
For those of us that are the “mom & pop” investors, we seldom “capitalize” any of our rental house expenses. So we don’t differentiate between CapEx and OpEx (operating expenses). When measuring the average spent on maintenance and repair for rental houses in Metro Atlanta, the 2019 average is about $2700 per house per year. But the range of the amounts spent by different landlords is as low as $0 per year to as high as $20,000 or more. These averages apply to landlords who are in the rental house business for the long term. For instance, after the house is rented, the landlord may spend well below “average” for maintenance while the tenant is in place. But once the tenant vacates, and you have to turn the property, those turnkey expenses will pull up the “average”.
To develop a better estimate for a property you own, or a property you are considering buying, start by looking at some of these factors:
Age – houses that are under 15 years of age cost less to maintain than do houses that are between 15 – 25 years of age. Between years 15 thru 25 owners will have a lot of HVAC replacements to make, roofs to replace, appliances to replace, and other CapEx related repairs as the house wears out. When considering houses that are over 25 years old consider the effective age. How old are these major components and when were they last replaced?
Quality – our company classifies rental houses as either A, B, or C quality where a C- property might be a Section 8 caliber property. Even though A quality properties are large, they continue to cost less money per year to maintain. B quality properties are the next least expensive to maintain and C quality properties cost the most.
Area – it is possible to have a C quality property in an A quality neighborhood. In that event, it is possible to renovate this C property and turn it into an A quality property. Once the property is A quality, you can find A quality tenants for it. And you will see the cost for maintenance and repair decrease. However, the opposite is not true. If you build a brand new house within a C quality area, that does not mean you will have an A quality rental. Granted you will have the most attractive rental in the area but A quality tenants do not want to live in C quality areas. So it will not take long for the property to revert back to its C quality condition like its’ neighbors.
In summary, in the Metro Atlanta market, if you are buying an A quality property in an A quality area, expect to spend an average of $1500 per year for maintenance and repair. For B quality properties expect to spend $2000 – $2500 per year for maintenance and repair. For C quality properties expect to spend $3000 – $3500 per year for maintenance and repair. Now – go and invest wisely.
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