how to reduce maintenance costs - Posted by chris carter

Real Estate Investing Triple Net Leases
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Posted by David Krulac on January 07, 2008 at 14:23:59:

  1. To your first letter, the tenants could respond, that’s nice, but so what. In addition there may be some tenants that you don’t want doing even the simplest of tasks.

For example i had an ederly womand tenant who could not turn off the water, when freeze damage broke a pipe. The water ran full bore for about 30-45 minutes before I got there. Needless to say there was a glacier of ice about 5 inches thick by the time I got there.

  1. your second letter may also get a so what responce and depending on nyour lease terms you may not be able to raise rents until the lease expires. And that may have the unintended consequence of tenants NOT calling you when there is some serious problem that you should be attending to like, roof leak, termites, or some other health, safety or hazardous situation.

you may want to consider adding a clause in new leases that the tenants are responsible for all minor maintenance below say $50. But you should also add to that clause that you want immediate notification of roof leaks, termites, etc.

Live and learn. After a tennat left and a place needed 22 new light bulbs, I added a light bulb clause saying that all light bulbs must be operational and of the proper wattage when they vacate. ( But I don’t replace light bulbs during tennacy, though I might make an exception for a ederly person or some extenuating circumstance like extremely high ceiling, etc.

But the BOTTOM LINE, imho the problem stems from two self inflicted wounds.

#1 purchasing property at a distance. I’ve sold property that was 30 minutes away because it was too far.

#2 Purchasing the wrong type of property. If you insist on long distance investing then select another property type. If you want growth but don’t care about income, buy some vacant land in the path of development. If you want rental income and ease of management, tenants pay all utilities and shovel the snow and cut the grass, then buy SFH, not apts. And if you really want hands off, long distancce, AND rental income go for NNN (Triple net leases with class A natiobnal tennats.)

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how to reduce maintenance costs - Posted by chris carter

Posted by chris carter on January 07, 2008 at 13:09:40:

I recently purchased a four family investment property out of state and signed a contract with a fairly reputable management company. Over the last six months, to my surprise, I have incurred a substantial amount of maintenance costs that exceeded my projected costs for entire the period of 2007. These costs have accumulated from constant request that include but are not limited to changing a light bulb, checking the A/C unit or furnance, or replacing a furnance. Each time that maintenance person is dispatched, I’m assessed approximately $40.00-80.00, plus parts. In other words, its costing me a dispatch fee of $25.00-40.00 plus the costs of a bulb ($2.00),instead the tenant replacing the bulb themselves. How do I reduce this costs?

I thought of two options to address this problem. First, I could send a letter to encourage the tenants to repair any miniscule problems that they may encounter such as light bulbs and unclogging the toilet, but I’m not sure if this is appropriate. Second, I could send a letter to explain the cost that I have incurred to respond to maintenance calls must be passed on through increased rents and whether this would have the result that I’m looking for (i.e., reduced maintenance costs)

Any ideas will help.
Thanks
Chris

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Re: how to reduce maintenance costs - Posted by Edwin

Posted by Edwin on January 07, 2008 at 23:24:07:

Your PM company is lazy and doesn’t have your financial interests at heart. Fire them. It’s the old story of “it’s not their money, so they feel free to waste it.” You’ll go broke paying $40-50 for each service call. I suggest finding your own handymen who will work for $10-20 per hour. Put a help wanted ad in the paper and also on Craigslist on the computer, if it’s available in your area.

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Re: how to reduce maintenance costs - Posted by Richard

Posted by Richard on January 07, 2008 at 21:12:43:

Well, for starters, what does your management agreement say regarding maintenance and repairs? What do the leases say regarding who is responsible for what? What does local Landlord/Tenant law say regarding who is responsible for what? Did you discuss a management strategy with your PM? Did the PM make an assessment of the condition of the property prior to purchase, and provide a budget proposal or pro-forma? If not, exactly who “projected” expenses, and based on what?

Typically, as a PM, I would expect the tenant is responsible for changing lightbulbs, unless they are difficult to access, but this should be addressed in the lease. Tenants are also routinely responsible for the cost of unclogging toilets/drains when it is found that the clog was created by the occupant (not a mainline clog, or big wad of hair from the tenant that just moved out, etc.)

Typically, I would expect the owner to be responsible for, and schedule on a regular basis, quarterly hvac services.

Typically, I would require authorization from the owner for the replacement of a furnace (or any expense over X $ as spelled out in the management agreement), except in rare emergency situations that must be acted on immediately.

If you have hired a PM, you should not undermine them by sending letters to the tenant, especially if you have no idea of the contents of the lease or local laws. Talk with the PM.

You might also make a few calls to find out what contractors in the area of the property charge to walk in the door for a service call. Is your PM using licensed contractors? Or “handymen”? This all should have been discussed and understood before you ever made an offer.

On a final note, letters don’t change tenant behavior. (legitimate)Invoices do.

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Re: how to reduce maintenance costs - Posted by Rich-CA

Posted by Rich-CA on January 07, 2008 at 21:01:42:

I would talk to the management company first. It is absurd for ANYONE to be dispatched for a burned out light bulb. This should be charged to the tenant as a tenant caused expense. Same for plugged toilet. They only plug because a tenant put something in there that should not be there or did not operate the toilet correctly (such as only flushing when full of toilet paper). Lean on the PM company to reduce expenses. Check your lease. Mine says routine maintenance and cleaning is their responsibility. Period.