Two kinds of cost
Maintenance falls into two groups. Running repairs happen every year in some form: a dripping tap, a broken extractor fan, a door that will not close, redecoration between tenants. Replacements are rarer and larger: a boiler, a kitchen, a bathroom, a roof covering, carpets throughout.
Running repairs come out of the year's rent. Replacements need money put aside in advance, because they rarely arrive at a convenient time.
The rules of thumb
Two shortcuts are widely used. Each gives a starting point, not an answer.
- A percentage of the rent, often around 10% to 15% a year. It scales with the property, but a cheap, high-yield house can need as much work as an expensive flat on twice the rent.
- A percentage of the value, often around 1% a year. It suits houses, but overstates flats where the building is maintained through the service charge, and understates older houses in cheaper areas.
The age and condition of the property matter more than either rule. A recently refurbished flat with a new boiler needs far less in its first few years than a Victorian terrace with original windows.
Build it from the parts that wear out
A better method is to list the items that will need replacing, estimate the cost and how many years each has left, and divide. The result is what you need to set aside each year so the money is there when each item fails.
Typical lifespans vary a lot with quality and how a property is used, but as a planning range landlords often allow:
- Redecoration: every three to five years, or at changes of tenant.
- Carpets: five to ten years.
- Combi boiler: around ten to fifteen years.
- Kitchen and bathroom: fifteen to twenty years or more.
- Rewiring: decades, but older installations may fail an electrical inspection sooner.
For example, if a replacement boiler would cost £2,500 fitted and the current one has five years left, setting aside £500 a year covers it. Do the same for each major item and add the totals to a yearly allowance for running repairs. Use the refurbishment budget to price the items, and the property costs pages for current material prices.
Costs that are easy to forget
- The yearly gas safety check and boiler service.
- The electrical inspection every five years, and any remedial work it finds.
- Smoke and carbon monoxide alarms and their replacement.
- Garden upkeep and clearing rubbish left between tenancies.
- Lost rent while work is done between tenancies.
- Leasehold flats: major works charges on top of the service charge, for roofs, lifts or cladding.
Put it in the numbers before you buy
Maintenance is the cost most often underestimated in a buy to let appraisal. Enter a realistic yearly figure in the investment calculator rather than a token amount, and see whether the deal still works. A property that only makes money if nothing breaks is not making money.
Keep the records
Keep invoices and dates for every repair and replacement. Repairs that restore something to its original condition are usually deductible from rental profit in the year, while improvements are treated differently. Good records make the tax return easier, help when you sell, and show you which properties cost the most to keep.