So, you are a buy-and-hold investor. You did all your research to set up your team. You joined a local real estate investment association, you researched a lawyer, accountant, banker and some local real estate agents. Your building is full of paying tenants — but now, they’re calling in with maintenance issues and questions.
I’ve met many landlords who have tried to become DIY maintenance managers to save money. While this certainly can be a great learning process before hiring outside contractors, it too often becomes costly in both time and efforts, especially when their skill sets don’t match the needs of the property. But sometimes we forget that the most important person on our real estate investment team may be the person holding the wrench or the rodder. As your portfolio grows, one of the key decision makers and trusted advisors on your team may turn out to be your maintenance manager. From small fix-it jobs to unit turn-overs to rehabbing your next acquisition, these tasks and associated expenses can add up quickly if you find yourself without a trusted guide in these decisions.
Too often when I ask landlords how their contractor was selected, the top — or only — consideration was price. I certainly appreciate how new investors may be caught off guard by the financial challenges of unexpected repairs. But the critical piece they overlook is preventing the compound impact that a bad selection of maintenance contractor may have. Sticking to some best practices can help to create successful contractor relationships, saving time, money and headaches in the long run.
First, do your research early and often. Keep a running file of new names and contractors as you attend local meetings. When you discuss issues with other investors, ask for references of local contractors they have used and had a positive experience with.
Establishing relationships with contractors and skilled labor can save you a lot of money in the long game. Remember, if you are looking to grow a portfolio, there are many tasks that need to be done and it’s important to value the skill set you bring to the table — and recognize which ones you lack. Often it makes financial sense to let a dedicated professional handle specific work and share with them your vision for your portfolio growth. Review your expectations on resident communications. Don’t forget that keeping tenants happy and renewing their lease year after year saves you money. Unhappy residents with short-term turnovers will cut into your income projections quickly.
I sometimes see owners elect to schedule contractors to handle residents’ preventative maintenance responsibilities. These discussions are reviewed at the lease signing, and in my experience, residents are happy to pay for the convenience of the help with a small fee directly to the contractor or landlord, since the landlord often has reduced volume pricing.
Appliances can be a big issue for small investors, as the repair options are limited and the costs can be prohibitive when comparing repair versus replace. Many investors establish relationships with local retailers that provide slightly used or bruised options, and these stores often offer small repairs. Remember, the cost of rental property repairs are tax deductible.
To help prevent frustration and unnecessary calls to the office and maintenance staff, it is important to make sure everyone knows what to expect when reporting a maintenance problem or emergency. A good place to start is outlining when the tenant can expect the repair to occur. In general, tenant maintenance requests should be handled in a time-efficient manner. If scheduling is a problem, let residents know they can elect to have a friend who is 18 or older at the property if they can’t be home themselves so the repair can be resolved in a time-efficient manner.
You should have a backup plan for when your contractors may not be available, as emergency maintenance requests may need to be handled immediately. Secure a 24-hour emergency resource contractor who you can call in the event this situation does arise in your building. Emergency weather conditions can sometimes produce severe breakdowns of the building plumbing, HVAC and electrical systems, and one contractor is not sufficient. Having a backup relationship with a large contractor who has plumbers, electricians and HVAC techs ready to handle your worst emergency situations 24 hours a day, seven days a week, including holidays, is important. While you may find their pricing cost-prohibitive for your routine needs, it’s best not to need to research for this at the time of need.
Your ultimate goal is to preserve the value of your investment and optimize your cash flow with safe properties and long-term residents. Making the right choices in your maintenance management is a key factor in ensuring that value.