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Cheapskates Only Cost Themselves

Cutting corners on essential maintenance can cost you more in the long run, explains Aaron Tunstall.

By: Aaron Tunstall

31 May 2019

Your Properties Are Worth hundreds of thousands or even millions of dollars. They secure your financial future. They are an investment to be treasured.

So why do some landlords begrudge spending money to maintain them? Maintenance is something every property owner needs to work into the budget. If you can’t afford the maintenance in your calculations, you can’t afford the property.

For many Scrooge types, if a property continues to be tenanted quickly and brings in a reasonable rent, there’s no need to spend any money on improving it.

That is not a successful long-term strategy. For a small apartment, it may cost as little as $3,000 every four years to give it a fresh look and feel, increasing the rent by $20 to $40 over a more dated property. After 10 years, you’ve spent $7,500 on maintenance and gained an additional $30 per week for six years – that’s $9,360, giving you a profit of $1,860.

Vacancy Costs

The short-sighted Scrooge next door who hasn’t spent anything on maintenance has seen the rent increases dry up over the years. His property has been vacant for two weeks out of each year, costing him $1000 annually for the past six years, plus the rent has barely moved.

At the end of 10 years he’s lost $6,000 in vacancies, at least $8,000 in lost rent and his apartment is worth $15,000 to $20,000 less than yours (which has increased in value by at least 50% over that decade). So he’s out of pocket by about $30,000 and he’s facing an $8,000 refurbishment bill because the apartment is falling apart. We sometimes find these owners will then sell the apartment rather than face the cost of renovating it.

Other examples of investors who are penny wise, pound foolish abound. Recently we sent an owner a quote for some well overdue maintenance.

We used our preferred contractor who does plenty of work for us – he is quick and cost effective, trustworthy and efficient. (If you have a contractor like this, they’re worth their weight in gold.)

Don't Lose Rent

The owner didn’t like the fact that the contractor seemed to be taking control of the job, so he asked us to stop the work and source three individual quotations on each item. We were happy to help, but in a hectic marketplace only a few good-quality tradespeople were available at any time. Many tradies don’t even bother to quote on jobs because they’re snowed under with work.

Meanwhile, client’s apartment sat empty for three weeks. Eventually we managed to pin down three quotes for each individual item (carpet, paint and new kitchen).

The cheapest was from our original contractor, who offers us preferential prices because of our longstanding relationship. The work was worth about $1,000 and the lost rent added up to around $1,350.

If you want an investment where you put the money in up front and never spend another dollar, buy some shares. If the property you own doesn’t justify any expenditure, it’s potentially not a great investment – perhaps you should consider selling it and buying something that’s worth keeping?

But if you have a property that keeps being a great addition to your portfolio and shores up your financial future, you need to put your hand in your pocket to maintain the value of that investment.

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