How much do real estate repairs cost? Hey friend, Stephen Michael Miller here. I've
got a question here from Chad Hayes and before I answer the question, I just want
to give a huge shout out to Chad. Chad is super active on our YouTube channel.
Giving lots of amazing comments. We love it, keep it coming Chad. Thanks so much
for your viewership. We really appreciate you here. You said, "How much do you take
out and set aside from each month's income per house for repairs?" So, first of
all, that is a fantastic question and it's one that I have a really simple
answer for. So, I'll just tell you typically, you want to set aside about
10% of the monthly rent, the gross monthly rent per home in
repair costs and just a plan for that. That's something that over time, as you
do more and more and more homes though, is going to probably diminish a little
bit because you're growing kind of a "slush fund." And so, if you've got multiple
homes. For example, in one LLC, well that LLC, you don't necessarily need that 10%
per year per home always. And so, as that grows and becomes bigger and bigger and
bigger, you probably need a little bit less per home and you know, you've got
this then larger grouping of homes that's all feeding into this slush fund.
So, that's the answer your question. But I want to go a little bit more into repair
costs and maybe some of the things that you would want to repair and also some
of the things that you may not want to repair. Because I think this is one of
the biggest things that gets people, when they're getting into the game when
they're becoming a landlord, this is one of the biggest things that really kind
of incentivizes people to get out of the landlord game, right? They get into these
repairs, they start to get the phone calls from their tenants saying, "Hey I
need this repaired and that repaired and and this is broken and that's broken and
please come and help me." And even when you're getting to the home before
or tenants in there, before you get into there,
oftentimes, a new landlord will buy the home and they'll do a whole lot
more than they need to, right? They'll look at the home through
the eyes of a homeowner rather than through the eyes of an investor. And that
could just shoot repair costs up you know through the roof. So, you want to be
aware of some of those things. So, let's talk about it. What things do you want to
repair? I would say that most things that you'll want to repair should
be, hopefully, as you're getting into properties, cosmetic and nature. Meaning,
it's really cheap to replace carpets, to to paint. These are really cheap fixes, to
caulk, you know, around airy areas, you know, windows things ,you know, things where
the air is getting in and letting air leak out. See, you know those things are
really, really cheap repairs. You can do, you can clean carpets if you don't need
to replace them. That can be a great cheap repair that you may want to do as
you're maybe turning over a property from one tenant to the next. But I want
to tell you a quick story of some of the things that I did to a home that I
probably should not have done and as a matter of fact, did not get my money back
out of this property. This is actually the very first property that I did, this
is back in Florida. I bought this home in Tampa, Florida. It
was a really good learning experience for me. But when I bought the property,
one of the first things that I didn't do that I should have. And was, I didn't
get a home inspection done on this property. Now, this is just before I had
actually gotten into home inspections, maybe one of the reasons why
wasn't. But, you know, it could have been one of the reasons why I got into home
inspections. But I didn't get a home inspection on this property and come to
find out, this home that I bought, it was built in 1924. It was, you know, just a
frame construction home which in Florida can be a bad thing if you're not aware
of it. Because it had massive, massive termite damage. Now, had I known
that beforehand, I probably wouldn't have bought the home or I would have
negotiated a much better price. Done the repairs, done what I needed to and still
had equity in the home. But I didn't know that. So, I got the home and when I
started opening up the walls and started doing some of my initial repairs. I was
looking at doing, it just became a much larger beast than it ever would have
been. I probably could have painted it and resold it not knowing, right? That
there was a termite damage. I could have even done some fixes to the
termite damage and sold it as it was. And probably gotten my money out of it. It maybe
even a little bit more but I I didn't do those things. Instead, I ripped everything
apart, I mean, I literally took it down to the studs. I went underneath the house,
I started jacking up the floors and evening out everything as much as I
could. I mean, I was going into this not with the eyes of an investor but with
the eyes of a homeowner. And I did everything. I added a bathroom, I completely gutted and
ran out the kitchen and put a whole brand-new kitchen with appliances and
everything. I mean, I spent about $60,000 on this home repair.
Which by the way, it $120,000 was home. Or actually,
It's about a hundred... $105,000 home. So, I put almost
60% more and back into the home. And it just didn't make sense. So, when you're
getting into a property, one of the biggest things that you want to make
sure that you're doing is not going overboard, right? Just oftentimes,
especially, if this is an investment property for you. Just doing those
repairs that will bring it up to the proper code, if you need to. Or that
will create a good environment for your tenants to live. And obviously, if there
are water leaks in the home, you've got to repair those things. If you know the
HVAC system isn't working and it has one, you need to repair those things. Those
are things that you just you need to do. And those costs on those, obviously,
that all varies by job. But what I would recommend, this is something that we've
done over the year, is we've found a really good handyman. Someone who has a
good reputation, somebody who, you know, they've got a lot of comments maybe on
their website or some good references that you can get. Who knows how to do
things really fast, really cheap but also really, really good quality. So, you don't
have to go back and keep on repairing over and over and over again. If you do
that, then you can keep your repair costs as low as possible and have the really
the most profitable properties. So, friends you're already at the end of the
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