Boost Your Annual ROI by Keeping Maintenance and Repair Costs Low

In our last post, we dove into the nitty-gritty of assessing ROI on prospective properties.

Today, we’re shifting gears to discuss a crucial aspect of property management: keeping maintenance and repair costs low to boost your annual ROI. Let’s get into it!

Understanding the Costs

When it comes to calculating your return on investment (ROI), understanding your costs is key. Sure, getting a property survey is a great start. It’ll highlight what needs fixing to make the place liveable. But surveys won’t tell you about the regulations you need to follow to rent out your property legally. If you’re not in the know, you could face hefty fines or, worse, have your property shut down.

The Importance of Compliance

One of the most critical regulations to be aware of is the Electrical Safety Standards in the Private Rented Sector Regulations 2020. These regulations require landlords to ensure that electrical installations are safe and regularly inspected. Ignoring these can lead to costly repairs and fines, which will definitely eat into your ROI.

Who Can You Trust?

Now, let’s talk about tradespeople. You might think you can rely on builders, electricians, and plumbers to guide you through the maze of repairs and compliance. But hold on! Why would they know the legal height requirements for bannisters or the specifics of electrical safety standards? They’re experts in their fields, but they’re not your compliance officers.

The Crystal Ball Dilemma

Tradesmen also don’t have a crystal ball to predict future repairs. Sure, they might suggest fixing other issues they spot, but they can’t provide a realistic budget for what you’ll need to spend over the next year. This uncertainty can lead to unexpected costs that can seriously impact your ROI.

Building Your Reliable Team

So, how do you ensure you’re not overpaying for maintenance and repairs? Here are a few tips to build a reliable and cost-effective team of tradespeople:

• Research and Recommendations: Ask fellow landlords or property managers for recommendations. Word of mouth can lead you to trustworthy professionals.
• Get Multiple Quotes: Don’t settle for the first quote you receive. Call around and get at least three estimates for any major repair work. This will give you a better idea of the market rate.
• Check Credentials: Ensure that your tradespeople are qualified and have the necessary certifications. This is especially important for electrical and gas work.
• Build Relationships: Once you find reliable tradespeople, build a relationship with them. A good rapport can lead to better service and possibly even discounts.

Surviving a Winter Boiler Crisis

Scenario: it’s the dead of winter, and the boiler in your fully tenanted property decides to throw in the towel. You’ve got tenants who are now living in a house that feels as cold as the North Pole, and your go-to plumber is off on a holiday. What do you do? This is the kind of nightmare scenario that can turn a cozy winter evening into a frosty disaster. Let’s dive into the chaos of a winter boiler crisis and explore how to navigate these icy waters.

The Callout Fee

So, you’ve got a broken boiler, and the first step is to call a plumber. Time is against you and you haven’t got time to go through the list of recomendations above (Building your Reliable Team section). After a few frantic calls, you finally find one who can come out—great! But wait, there’s a non-refundable £75 callout fee. You pay it, hoping for a quick fix. The plumber arrives, takes a look, and informs you that three parts need replacing. He then leaves to price them up, leaving your tenants to shiver through another night.

The next day, he returns with bad news: the parts are unobtainable, and the only solution is to replace the entire boiler for a whopping £2750 which he can do straight away. Now you’re faced with a tough decision: do you pay this cowboy to get your tenants warm again, or do you start the search for another plumber?

The Dilemma

In my own experience, a long time ago, I faced this exact same situation in my house (thankfully not a rental). Call it a sixth sense but something didn’t sit right with that plumber and I wasn’t willing to part with £2750 so we decided to tough it out for a couple of nights without hot water or heating  until our original plumber could take a look. He ended up charging us just £50 to replace a filter! Cheaper than that other cowboy’s callout fee alone! But when you have tenants, waiting it out isn’t an option. Their comfort and well-being are at stake, and they might start to think that you don’t care about them.

The Financial Impact

Let’s talk numbers. In our last blog post, we calculated the annual ROI (Return on Investment) for a property. We found that with costs of £3500 per room (for a six-room property), the annual ROI was a solid 11.6%—above the average of 10%. But what happens if those costs jump to £4500 per room because you are getting charged over the odds for repairs?

Here’s the maths:

• Gross Return: £50,000
• Total Costs: £4500 x 6 = £27,000
• Net Income: £50,000 – £27,000 = £23,000
• New ROI: (£23,000 ÷ £50,000) x 100 = 9.2%

Suddenly, your investment looks less appealing and below the average of 10%. As you can see a bad strategy for keeping costs down—or no strategy at all—can significantly impact your ROI and turn a good investment into a bad one.

Getting Competitive Quotes

Now, let’s address the elephant in the room: how do you get competitive quotes when you only own one property? The truth is, you don’t have the same leverage as someone with multiple properties. If a tradesperson knows you’re not a repeat customer, they might not feel the need to offer you a favourable price.

This is where many landlords turn to Property Management Agencies. These agencies have the clout and established relationships with maintenance professionals. They manage multiple properties, which means they can negotiate better rates and ensure that tradespeople show up and do a good job.

The Benefits of a Property Management Company

• Negotiation Power: They can secure competitive rates due to the volume of work they provide.
• Reliability: They have a roster of trusted professionals who are more likely to show up and complete the job efficiently.
• Cost Savings: In the long run, they can save you money by preventing costly mistakes and ensuring timely repairs.

Remember, the temptation to go it alone on your first investment is a strong one. Well you can always get one in when it starts going pair shaped can’t you? Perhaps it’s better to get one in right at the start. As the saying goes “We are stronger when we are together”.