Home repairs have steadily increased the past few years. For properties less than seven years old, I recommend usually use a factor of 5%-7% for normal wear and tear repairs. To calculate yearly costs, simply multiply your monthly rent by 5%-7% and multiply X 12 months. For multi-family units, I would use a factor of 10%, and 7%-10% for homes older than 10 years old. These are average normal wear and tear estimate costs and do not include vacancy periods, damages, water penetration issues, or expensive a/c and plumbing repairs.
The most common normal wear and tear repair items are fence repairs, leaking faucets, faucet and bathtub cartridge replacement, minor plumbing blockages and repairs, minor appliance repairs, garbage disposal replacement, basic a/c services, garage door maintenance, etc. Most of these repairs can be completed for less than $300.
Code changes have made plumbing repairs more expensive. Seven years ago, we could replace a hot water heater for about $400-$500. The City of Austin code requires a permit and drain pan system when installing a new hot water heater (unless system has existing pan). Due to weight, removing and replacing a hot water requires two technicians. The technicians have to drain tank, remove, install, bring hot water heater up to code (install drain pan system), and take to dump and pay dump fee. Now, it costs anywhere from $900-$1,200. The cost of a hot water heater alone is about $400-$500. Units in attic area are the most expensive to replace, because the attic stairs need to be removed to make room for the new hot water heater.
A/C systems have especially been affected by recent green laws. Many homes and multi-family units have less efficient a/c systems with a SEER rating of 10 or less. SEER stands for “Seasonal Energy Efficiency Ratio” and is a measure of the energy efficiency of the air conditioning unit. Units with a 12 SEER rating or below are no longer manufactured. Hence, instead of replacing a 10 SEER a/c condensing unit for $800, it now costs a minimum of $1,200-$1,300 to replace with a new 13 SEER unit. The cost is higher for larger units. The costs of replacing a more efficient coil, furnace, air handler, condensing unit, and replacement parts have increased about 40% to meet new energy efficient requirements.
Water penetration problems are also expensive repairs. If a leaking hot water heater or toilet floods an area of a home, we have to extract the water, setup fans and dehumidifier unit(s) to prevent mold and dry area, remove wet carpet padding and sometimes baseboards. These repairs can range from $400 to over $2,000 if water is extracted in multiple rooms. This does not include the damage to wood flooring, carpet, cabinets, baseboards, or sheetrock repairs.
Non wear and tear repairs include tenant damages, vacancy costs, and make ready costs. Carpet may last five years, and most homes need exterior painting every 5-7 years. I recommend landlords set aside at least 2-3 months of rent in a savings account to pay for unexpected repairs, make ready items, and or vacancy periods.
If you plan on being a long term landlord, please budget and plan for these items. Hot water heaters may last 7-10 years. A/C systems should last 10-12 years or more. However, we have replaced many coils and condensing units less than 10 years old, and most a/c systems only have a five year parts only replacement warranty.