With the average rental rate of a commercial property standing at $38.36 per square foot, there has never been a better time to start investing. Still, such a role comes with many expenses, and you need to know you can keep up with them. So, how much should you expect to spend on commercial property maintenance?
The following are some of the most common methods to approximate how you can go about estimating costs. Of course, your specific circumstance may demand different numbers, so take this only for a good practice ballpark figure.
50% of the Income
One of the most common ways of calculating maintenance is to assume that 50% of all the income you receive will need to go back into expenses. For example, if you earn $10,000 per month from commercial property rent, expect to spend $5,000 on this.
Note that this does not include any mortgage you might need to pay, so do not include this in your landlord budget.
1% of the Cost
Another property management cost estimate suggests that you will pay around 1% of the price of the property in maintenance.
This does not always work, as some properties sell for way outside the average, although it is a good ballpark for properties sold at a median price.
Square Footage
For those with larger properties, especially if you paid high or low for the location, this option is more likely to end up having an accurate result. By following this rule, you need to set aside $1 each year per square foot of the location for maintenance.
This accounts for many factors, including a building with several floors, and one where there is a lot of open space you may need to manage.
1.5x Rent
Another simple method of setting aside maintenance costs suggests that you save an amount of money equal to 1.5x the monthly rent. If no maintenance is needed for a time, you can pocket the difference. Of course, a lot of the time, you can fill up this bucket of costs from a deposit the renter offers you when they first move in for covering such issues.
This option also relies on you setting an appropriate lease cost for the property based on what you can expect to pay each year in maintenance. It also means that you should increase this cost to match the expenses if the costs you pay also increase for any reason. If the commercial tenant asks for reasons why you are increasing the costs they pay, you can then show them the real impact it has.
Is Commercial Property Maintenance Too Much Effort?
With the above information in mind, you can put aside the right amount of money for commercial property maintenance costs. Still, for many people, this might all be far too much effort, especially if they have a very large portfolio. Allow us to help with that.
We are experts in property management in the San Mateo, California area. We specialize in helping you handle the buildings you have so you can work on other areas of your business. So, get in contact today and talk to us about how we can help you get the most out of your properties.