A property manager is typically hired to take over all daily operations of a rental property, and one operational aspect that allows us to do so is a property management maintenance reserve. A property management maintenance reserve can play a pivotal role in your property management experience and the success of your rental property, as well as help us perform our job effectively
As professional Orlando property managers, we know the significance and benefits of requiring a property maintenance reserve. In this article, we’ll break down everything you need to know about a property maintenance reserve and why it is crucial to the rental property management process.
What Is a Property Maintenance Reserve?
A property maintenance reserve is an account that holds funds to cover maintenance and repairs that your property managers deem necessary throughout your rental property’s lease term. The property maintenance reserve account allows property managers to handle emergency and routine repairs and helps increase tenant satisfaction and retention.
The property maintenance reserve is a separate account strictly designated for maintenance and repairs and should remain untouched in the event that no maintenance is necessary. Rental property owners typically put aside their own funds in addition to the property maintenance reserve held by a property manager.
Why Do I Need a Property Maintenance Reserve?
A property maintenance reserve ensures that funds are readily available for maintenance issues that might come out of the blue or need to be addressed during the lease term. Regardless of whether your property is one or 100 years old, it is necessary to be prepared to pay for repairs as anything is possible. Promptly tending to maintenance issues and repairs can be the cornerstone of successful rental property ownership. A well kept property will help attract and retain tenants, as well as ensure a steady cash flow is coming your way.
The most common rental property maintenance issues include:
- Pest control
- HVAC issues
- Roof leaks
- Paint touch-ups
- Plumbing issues
- Electrical systems
- Appliance repair
Why Does My Property Manager Require a Property Maintenance Reserve?
A property maintenance reserve allows for your property to run more efficiently. The required reserve is an industry standard to reduce your need to provide owner funds to contribute to invoices due and received when rental income has already been distributed.
The last thing you should do is assume the property will have no issues and fail to set aside funds. A property maintenance reserve ensures you are not in a financial scramble when a maintenance issue does arise. As a rental property owner, you have the responsibility of funding necessary maintenance repairs — failing to do so will result in angry tenants and bills awaiting your payment.
Your property manager should not have to contact you every time there is a maintenance issue. Having to do so will only complicate matters, potentially delaying the repair process and inconveniencing your tenants. Your reserve account will allow your property managers to do their job effectively and, more importantly, allow you to earn a passive income with minimal involvement.
A property management maintenance reserve account will save you time, and money, and keep you compliant with local, state, and federal laws while reducing your involvement. If we had to request funds from our clients for every maintenance request, they’d essentially be managing the property themselves.
How To Estimate Home Maintenance Costs
Rental property owners and investors will have different strategies for calculating how much to set aside for rental property maintenance. The amount held in your property maintenance reserve account depends on a number of factors such as property age, condition, personal financial security & stability, and risk tolerance. 
As an Orlando property manager, I recommend setting aside 1-3% of your rental property value for maintenance. For example, if your property is worth $400,000, you should set aside between $4,000-$12,000.
Will the full amount of your reserve account be used during the lease period?
Probably not. Unless there is a major repair or replacement, this reserve account will typically contain more money than will need to be spent.
How Much Money Will be Used on Maintenance During a Typical Tenancy?
There is no way to know for sure how many repairs will be needed or how much money will be spent on maintenance. At The Listing Real Estate management, we tell property owners to expect to pay 1.5x the monthly rental amount on maintenance. This means that if your property’s monthly rent is $1,500 a month, you should be prepared to spend $2,250 on rental property upkeep.
Do I Need a Personal Reserve Account and a Property Management Reserve Account?
It is crucial to have a property maintenance reserve whether you’re working with a property management company or managing the property yourself. However, those working with an expert property management company will typically have both a personal reserve account, and a reserve account held by the property manager.
The difference between these two accounts is the amount of money held in each one. While the property management reserve account will be mandatory to proceed with management services, a personal account is your own choice.
Any property manager will typically require anywhere between $250-$600 to be held in the property management maintenance reserve account. Your property management agreement will detail the exact amount and process required by your specific property manager.
What Happens When my Reserve Account is Used?
If the maintenance reserve is used, it will be replenished using your tenant’s next monthly rental payment.
Our property management agreement specifies that your maintenance reserve account will not go under a certain amount without the knowledge and approval of the property owner. Unless there is an emergency that requires immediate action, we will not proceed with a repair exceeding the reserve account without our client’s approval.
A property manager will use their discretion for what is deemed an emergency. The following may be considered emergencies:
- Flood
- Electrical fire
- Chemical incident
If a repair exceeds the property management maintenance reserve account, your personal maintenance reserve will come in handy.
Does a Property Manager Take Care of Maintenance?
One of the most beneficial aspects of hiring a property manager is that we will take care of all maintenance for your property. At The Listing, we take a proactive approach to maintenance and repair requests, working closely with a network of licensed and insured vendors whom we work with frequently.
What makes us different is that we establish a relationship with each vendor we work with, allowing for seamless transactions and top of the line maintenance work. As your property manager, I can assure you that each maintenance request is handled with care and only completed with a professional who offers a fair and reasonable price. If our team feels as though a vendor is up-charging us, we will get a second opinion to ensure each procedure aligns with our goals and upholds our property management agreement.
As a trusted property management company, we make it a top priority to enforce the property maintenance reserve account agreement. The satisfaction and success of our clients is most important to us, and why we do what we do at The Listing Real Estate Management.
If you have any further questions about the property management maintenance reserve account, don’t hesitate to reach out to me, I’m always available to answer any questions regarding Orlando property management!
At The Listing Real Estate Management, your boutique property managers, we are here as a resource to you and your rental property! To learn more about our property management services, contact us today to set up a call or CLICK HERE for a complimentary price analysis for your rental property. Cheers!
