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:
- maintenance that is put off will cause more expensive problems in the future.
- maintenance that is put off will cause tenants to vacate and make it harder to fill vacancies.
- 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.