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What is Deferred Maintenance in real estate?

What is deferred maintenance?

Deferred maintenance is maintenance that needs to be performed on a property but has not yet been performed. Deferred maintenance is a cost and a liability. Deferred maintenance is one of the most destructive mistakes made by landlords for the following reasons:

  1. maintenance that is put off will cause more expensive problems in the future.
  2. maintenance that is put off will cause tenants to vacate and make it harder to fill vacancies.
  3. maintenance that is put off will make it difficult to charge market rent.

The key takeaway is that deferred maintenance can be destructive to value. A property owner -- whether a homeowner or a rental property investor -- should be careful not to defer maintenance except in the following cases:

  • You are already planning to do a larger related or major renovation and are therefore conserving cash for this planned investment.
  • The maintenance being deferred is purely cosmetic and will not destroy financial value.

For example: painting can be deferred a couple of years if you have a tenant on a long-term lease. Just know that you will need the finds to pay for this maintenance when the time arises or it can harm your ability to fill a future vacancy.