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Originally Posted by VladtheImpaler
...what is your average annual burn for repair/maintenance? Particularly for older house - 1980 or older. Thanks in advance.
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There is no good law of averages applicable to one single house for rent, unfortunately. It all depends on your property condition somewhat, but mostly on the quality of your tenants. A few years ago, I've rented a house to the sweetest looking Filipino couple with two young children. Always paid rent on time, so there was no need for me to worry. Until one day a neighbour called and asked me to come by and look at it. The guy was fixing car engines in the basement of the house. The entire basement was covered in oil marks. Plus, they've had six or seven other people living in the house with them seemingly in every corner. It was insane. I've kept their deposit but the repairs were in excess of $14,000. And my lawyer said that suing them will likely result in costs, aggravation and little to no recovery. On the opposite, another renter, a burly roughneck gas-fitter working shifts in Fort Mac left the house better than it was when he moved in. He even replaced basement berber carpet with new one at his costs without telling me, because his dog pulled a few loops. Point is, you never know who you get until they move out. it is impossible to predict the average spend.
An old house will need a new furnace and a new water tank at some point - that's $15,000 give or take. New roof - $5,000 to $10,000 depending on the roof size. New windows, perhaps? How do you allocate this capital spending on average? You don't. When the furnace goes, you say the f-word and replace it...
A much better predictor is net operating income (NOI) before financing, which should yield 5%-6% annually. Even better indicator is return on equity invested after financing (ROE), which should be closer to 10% annually if you property is performing well.
Large residential apartment landlords use repair/maintenance allowance of $2,500/unit/year to $5,000/unit/year in their rental pro-forma depending on the age, condition and built-form of the building (i.e. wood-frame vs. concrete). Newer properties tend to go on the lower side of that range.