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The major expenses most likely to hit a single family rental are the big systems that wear out on their own schedule: roof, furnace, air conditioner, water heater, sewer line, electrical panel, windows and appliances, plus turnover repairs between tenants. You cannot stop them from aging, but you can find out how old they are before you buy and save for them before they fail.
This guide covers how to spot what is coming, how Michigan's climate affects repair costs, how JMZ Management handles maintenance and approvals, and how to build a reserve.
During the inspection, write down the age, condition and remaining useful life the inspector expects for each of these:
Our posts on signs of electrical problems in a rental and basements, attics and fireplaces cover areas inspectors often flag.
Cold winters, snow and freeze-thaw cycles raise the stakes on a few systems. A furnace failure in January is an emergency, frozen pipes can cause serious water damage, and clogged gutters can lead to ice dams and roof leaks. Under JMZ's emergency guidelines, no heat when the outside temperature is below 60 degrees counts as an emergency, along with fire, flooding, sewage backup and an inoperable toilet in a one-bathroom home.
Seasonal checklists help. See our fall property management checklist and winter rental maintenance guide.
Every time a tenant moves out, the home needs cleaning, touch-up paint and small repairs before the next tenant moves in. JMZ puts typical turnover cost at $200 to $500, and part of it can often be withheld from the security deposit when the tenant caused the damage. Homes with more wear, or longer gaps between tenants, cost more. Our guide to the make-ready process in Metro Detroit walks through it.
Split your repair budget into two buckets:
Example only. Suppose the inspector expects the furnace to need replacement in about five years, and a contractor quotes an example $6,000. Saving $100 a month for 60 months covers it. Repeat the math for each system using your own quotes, and add the monthly amounts together. The figures here are hypothetical, not price estimates.
The tax treatment of a repair and a capital improvement can differ. Our post on repairs vs. capital improvements explains the difference, and your tax professional can tell you how it applies to you.
If you hire a manager, ask how repair decisions work before you sign. At JMZ:
Preventive work, such as furnace service before winter and gutter cleaning in the fall, is the most reliable way to keep emergency calls down. Our post on cutting maintenance costs has more ideas.
Many Metro Detroit cities inspect rentals before issuing or renewing a rental certificate. Common items include smoke and carbon monoxide detectors, handrails, electrical issues and water heater venting. Through its Cert Assist Program, JMZ handles the city's forms, fees, scheduling, violation repairs and final inspection. City fees and repair costs are paid by the owner.
The most common major expenses are the roof, furnace, air conditioner, water heater, sewer line, electrical panel, windows and appliances. Their age at purchase tells you which are likely to come first.
There is no single right percentage. Build the reserve from the actual home: get the age and expected replacement cost of each major system, divide each cost by the months until replacement, and add a routine maintenance allowance.
The owner pays for most repairs. At JMZ Management, work orders over $500 need owner approval with a contractor estimate first.
JMZ's guidelines treat fire, flooding, sewage backup, an inoperable toilet in a one-bathroom home and no heat when it is below 60 degrees outside as emergencies.
Big repairs are not a surprise if you know how old the systems are. Inspect carefully, save monthly for each major replacement, and keep up with preventive work so the next expense is planned instead of an emergency. At JMZ Management, your property is our business.
This article is for general information only and is not legal or tax advice.
Want a manager who keeps maintenance planned and approved? Get a free rental analysis or management proposal at jmzmanagement.com/freerentalanalysis or call 248-284-6990.
CONTACT US to learn more about professional property management in Michigan.