How long you hold an investment property for determines how much you would invest in maintenance and capital improvements. Typically, the longer you hold a property, the more you spend on enhancements to maintain its value.
Preventative Maintenance. These activities are routinely scheduled, relatively minor in scope, and are quick to complete. Preventative maintenance includes changing filters in AC & Heater units, landscaping, weatherproofing, cleaning the gutters, etc. No matter how long you hold a property for, it is important to avoid being short-sighted. These preventative measures minimize the risk (and the cost) of larger issues that could arise if these activities were not implemented on a regular basis.
Predictive Maintenance. These activities involve larger equipment with sensors, alarms, or alerts that give advance warning to prevent equipment failure. That means that you should have a good idea of when you’ll need to take equipment offline next. For example, pool equipment and access systems should all be maintained according to manufacturer guidelines. This type of maintenance ensures that equipment is functioning appropriately and managed for the long term.
Scheduled Maintenance. Scheduled maintenance refers to activities during which you will be taking a piece of equipment offline or shutting down a facility for an extended period of time (1-3 weeks). An example of this would be maintenance on AC chillers that need to be removed, cleaned, replaced, or rebuilt every 10 years or so. Knowing the standard useful life of equipment and scheduling maintenance around it could reduce chronic operating problems. It’s important to keep an eye on these activities so that you can schedule them at the appropriate times and adequately notify tenants of any down-time.
Pop-up Maintenance. These activities are minor in scope and quick to complete like preventative maintenance, but they are NOT predictable. These include light-bulb changes and clogged sinks. Again, most of these activities will need to be addressed regardless of your investment hold period. If not cared for, it may significantly affect tenant satisfaction & safety, building reputation, and the ability to generate maximum revenue streams.
Emergency Maintenance. These are unexpected, catastrophic issues like burst pipes, electric fires, etc. They are often expensive to remedy, but need to be addressed immediately to ensure the safety of tenants.
Key Takeaways:
Investors who are holding a property for the short-term (up to 3 years) should invest funds primarily to ensure the asset is clean, in working order, and up to code. Typically, you wouldn’t invest in large capital expenditures, because you won’t hold the property for long enough to recoup investments.
Investors holding assets for up to 5 years would do everything the short-term investor does, and if they intend to reposition the asset, should budget 2-3 years upfront to plan and execute the renovations. An additional 1-2 years post-repositioning will help recoup capital investments, generate a stabilized higher cash flow, and increase the overall market value of property.
Long-term investments (5+ years) should be highly valuable assets in good locations. These investments should be extremely profitable. If the intention is to hold these assets indefinitely, they warrant strong maintenance for the long-term and consistent capital investment.