Imagine you found a great rental property at a great price. You’ve jumped through all the financing hoops, paid the lawyers, and taken possession. You or your property manager has found an ideal tenant. They’re through the screening process, you’ve received first month’s rent and security deposit and they’ve moved in. It’s all going smoothly, money is flowing into the bank—you’re a genius!
But then …. The dishwasher mysteriously quits working after the first week. A drain that appeared to be fine on the home inspection, starts to back up after the third shower in the house. A window screen that was fine on the move in inspection—just falls out in a windstorm.
Despite our best efforts with home inspections, and even move in inspections with our tenants, sometimes there are little issues in a house that are “discovered” after the new homeowner or tenant has been living there for a month or two. Experienced investors know to expect a few issues like this after a new tenant moves in, or after buying a new-to-you property. Some investors even call it “normalizing” a property. They simply expect a few repairs and maintenance calls in the first month or two—as the tenants find little things that need fixing.
Many investors just budget for a reserve fund, and some budget for immediate repairs and maintenance. What’s the difference? A reserve fund allows some money in the budget to deal with the weird things that happen; for example, when a 2 year old furnace suddenly quits—right after the warranty expires. A fund for immediate repairs and maintenance is often taken directly from your inspection report; for example, you know that a tap needs replacing, the locks need to be changed, and a deck railing needs replacement as soon as the snow melts.
No need to panic when all these little issues arise in the first 3 months or so of owning a home or rental property. We all make sure to get the best home inspection possible, and then work through any early repairs that come up. There’s even a bonus here that you can earn some brownie points for great customer service—responding quickly and efficiently builds trust and credibility with your new tenant. So we suggest investors plan and budget for “normalizing” their property. It’s just part of the journey to growing your wealth through real estate investing.
