Today, we dive into a topic that’s crucial for any property investor: repairs and maintenance costs. While owning an investment property can be a gateway to financial success, it’s essential to stay informed about the potential pitfalls and opportunities that come with property ownership.

Imagine this: You’ve just secured your dream investment property. It’s shiny, new, and bursting with potential. But, like any other asset, it requires some love, care and attention to keep it performing at its best. That’s where repairs and maintenance costs come into play – but, it’s not all bad, SARS might even pay for those costs…

SARS Can Pay For Your Repairs

Yes, you read that correctly. If your expenses are in line with the regulations, recorded correctly, and processed correctly, then they will count that against the income of the property, which will reduce your tax liability. Yes, SARS will actually pay for the expenses of YOUR investment property. But beware, don’t try to do this yourself, or by someone who doesn’t fully grasp the tax benefits of the Wealth Masters Way, because it will lead to even more headaches and costs down the road.

The Hidden Dangers of Deferred Maintenance

Think of deferred maintenance as a sneaky adversary. Ignoring minor issues today can lead to significant headaches (and expenses) down the road, and very upset tenants. A leaky roof, faulty plumbing, or electricals can quickly transform into budget-busting nightmares for your portfolio.

So, how do we avoid this?

Establishing a Realistic Budget

Understanding the financial implications of repairs and maintenance is vital for any property investor. You should set aside a portion of your rental income each month for these expenses, or factor it into your calculated shortfalls, creating a dedicated fund that acts as a safety net when unexpected repairs arise. By allocating funds wisely, you’ll ensure your property remains in top-notch condition, attracting reliable tenants and protecting your investment’s value.

But, as we always say at Wealth Masters, there’s always a way around this. If you met our property professionals and planned your portfolio carefully, you may very well have a cash flow positive property which will cover these shortfalls over time.

DIY vs. Professional Services

Ah, the eternal dilemma! Should you tackle repairs yourself or hire a professional? While DIY might save you some money upfront, it’s important to know your limits – and the limits of Oom Piet who claims to be able to do it all for a pack of biltong and some beer!

If you ever decide to sell your property, you will be required to submit a Certificate of Compliance (COC) for items such as the electricals of the property. This is definitely not the time you want to realise that Oom Piet was not the most experienced electrician you could have asked to change the wiring on the plug point. There is an Afrikaans saying that fits so well here… “goedkoop is duurkoop” which roughly translates to “buying cheap is buying expensive”.

Proactive vs. Reactive Approach:

Don’t wait for issues to escalate before taking action. Adopting a proactive mindset when it comes to repairs and maintenance can save you big time. A happy tenant will be a constant tenant, and the less you have to replace your tenant, the less effect it will have on your portfolio’s cash flow. This is why it is so important to either regularly inspect the property yourself, or, have a managing agent who will do regular professional inspections.

You cannot always rely on your tenant to let you know when there are problems. A friend of mine shared a horror story with me. He had a property in Stellenbosch that he was renting out through Airbnb. He had a 6-month booking, in the middle of Winter, which is amazing for the property’s cash flow during the quieter months. But, because it was winter and chilly, the tenant never opened the windows in the bathroom, and because of the excessive steam from the baths and showers, mould started to grow in the bathroom. After 6 months, the walls and ceilings were absolutely covered in mould, and not once did the tenant mention anything to my friend. It ended up costing him thousands to repair all of the damage caused. This could have easily been spotted and resolved well in advance if regular inspections were being done on the property.

Improvements

In the beginning of this article I mentioned that SARS will, in effect, pay for your repairs, but we need to clearly define the difference between repairs and improvements. By the legal standard, the difference is this: “Home repair is the work done to maintain the performance, appeal, and function of a home. Home improvement entails changing to the property to enhance its functionality, aesthetic look, design, and feel”.

So, if you are doing something to add value to your property, that is seen as an improvement, not a repair. This amount will be included in the calculation for Capital Gains, if and when you decide to sell the property. Unfortunately, here the rules of the government officials do not apply to the common people – a “Fire Pool” cannot be deducted in our case, sadly.

SARS also won’t be paying for the addition of a carport on your property, but you will still get benefits long-term. BUT, that is only if you keep all of the documentation (invoices and proof of payment) on hand for when you sell the property, and you have an accountant who knows how to use the right principles to get your tax liability as low as possible.

Building a Reliable Network of Contractors:

One of the secrets to success in property investment is having a network of trustworthy and reliable contractors at your fingertips. From plumbers to electricians, building a team of experts who understand your property’s needs can save you time, money, and the stress of scrambling to find help during an emergency. Sure, Oom Piet will be a great one to call on when you have a small job, but have the professionals on standby.

In conclusion, repairs and maintenance costs are an integral part of successful property investment. By acknowledging their importance and incorporating them into your investment strategy, you’ll be well-prepared to tackle any challenges that come your way. Remember, taking proactive steps today will save you from costly headaches tomorrow.

Did this article get you excited? Well, there is only so much I can say in a short article. If you want to find out more, and have not already joined us in one of our events or webinars, then join us at the next event where we will unveil the well-guarded secrets of the wealthiest and most successful property investors. Register now to secure your spot and take the first step towards a future of unlimited possibilities in the world of property investment.

So, fellow investors, stay vigilant, be prepared, and let your investment properties flourish with the right professionals. After all, a well-maintained property is not just a roof over someone’s head; it’s a pathway to financial prosperity for your future generations.

Happy investing!