Real Estate Investor Magazine South Africa November 2013 | Page 30

MAINTENANCE

BY KOOS DU TOIT

Don’t Let Repairs
Get your finances down

O

ne of the recurring pitfalls property
investors step into is neglecting the
maintenance on their investment
properties, most often as a result of financial
constraints. There are, however, numerous
simple strategies buy-to-let property investors
can implement to ensure regular maintenance
on their properties, and that they harness the
full benefits of such regular maintenance.
The recent FNB Estate Agent survey clearly
showed the impact of economic constraints
on the regular maintenance of properties. The
percentage of homeowners “fully maintaining
their property and making some improvements”
reached a low of 27% in 2008. The percentage
of owners not improv ing but stil l f ul ly
maintaining homes” declined to between 20%
and 30% around the recession of 2008/9. The
percentage of homeowners attending to basic
maintenance only, which FNB notes means
in effect the property will “go backward” over
time, reached a concerning 34% in the first
quarter of 2009.

and continues for as long as
the property is held.

Thorough inspections
Acquiring a quality property
off-plan, prov ided that
the developer is registered
with the NHBRC (National Home Builders’
Registration Council), should delay significant
maintenance costs for two or three years.
Nevertheless, the investor should thoroughly
inspect the property before making an offer.
Acquiring an older property exposes the
investor to increased maintenance risk.
To manage this risk, a NACHI (National
Association of Certified Home Inspectors)
registered propert y inspector should be
appointed to inspect the property thoroughly
and provide a report detailing defects, repairs
and maintenance issues, as well as the cost
of attending to these, to guide the investor’s
buying decision.

Cash flow considerations

Financial constraints certainly curtails a
property owner’s ability to the seemingly
never-ending requirements to patch, paint,
repair and replace fixtures and fittings, and to
deal with mould, pests and normal wear and
tear. However, the long-term consequences
of neglecting regular maintenance are far
greater. Experts estimate that the cost of
delayed maintenance can be as much as 15
times more than the cost of the required
ongoing maintenance, as small repairs and
routine maintenance turn into major problems.
Furthermore, poor maintenance will dampen
growth in the value of the property, make it
increasingly difficult to find quality tenants
and collect market-related rentals and reduce
the possibility of a quick sale at a marketrelated price.

Professional property investors factor the cost
of regular, ongoing maintenance into their cash
flow projections when considering a property,
using custom-designed software such as the P3
Property Wealth Manager. This allows them to
make informed decisions about the return on
investment of the property under consideration,
given the maintenance requirements and the
expected ongoing costs thereof.

So how does an investor avoid this pitfall?
Professiona l proper t y investors ta ke a
professional approach to maintenance, which
commences even before the property is acquired

Disciplined maintenance schedules

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November 2013 SA Real Estate Investor

Building up a reserve fund
As a property ages, the maintenance and repair
requirements increase. Recognising this risk,
professional property investors build up a
reserve fund for unexpected repairs or major
maintenance beyond the regular, ongoing
maintenance budgeted for in their cash f low
projections.
Professional property investors implement
regular maintenance schedules, task rental
management agencies to conduct regular

inspections and maintain good relations with
their tenants to ensure they are always informed
of maintenance and repair requirements or
potential problems. And, since they have
budgeted for ongoing, regular maintenance,
as well as unexpected repairs, they are able to
attend to any issues swiftly, ensuring minimal
disruption to the tenants and preventing delays
which could escalate the costs involved.

Quality contractors
Professiona l propert y investors appoint
reputable, reliable contractors who will attend
to the maintenance and repairs professionally,
swiftly and cost-effectively and will provide
the necessary guarantees and warranties on the
work they have done.

Accurate recordkeeping
Professional property investors ensure they
keep accurate records of all maintenance
and repair issues, and file quotes, invoices,
g ua rantees and wa r ranties in an easi ly
accessible manner. This not only prevents
disputes with tenants, but also ensures that the
costs are factored into their tax calculations.
Taking a professional approach to property
maintenance is a simple but highly effective
way to manage the cost of regular, ongoing
maintenance and reduce the risk of unexpected
and significant maintenance and repair costs.
It further not only ensures that an investment
property appreciates in value over time, but will
also ensure that the property remains rentable
to quality tenants at a higher rental and that the
property can be sold at a higher price, should
the property asset be disposed of.

RESOURCES
P3 Investment Group

www.reimag.co.za