Are surprise repairs and maintenance costs getting you down?
It happens to every commercial property owner or manager eventually. You get hit with some unexpected expense that knocks your budget out of whack.
Maybe it’s that HVAC unit that just went kaput. Or the parking lot is starting to show its age. Or what about that roof that sprung a leak and cost thousands in damages?
Well…
Instead of constantly reacting to maintenance emergencies, it’s time to be proactive.
Here’s how to build a maintenance budget that actually works. And you’ll see…it’s not as difficult as you might think.
Let’s dive in.
What you’ll learn:
- Why Do Commercial Properties Need Maintenance Budgets?
- The 3 Best Maintenance Budget Formulas
- Parking Lot Striping Costs
- Asphalt Sealcoating Costs
- How To Allocate Your Maintenance Budget
Why Do Commercial Properties Need Maintenance Budgets?
If you don’t have a realistic annual maintenance budget — and stick to it — you’re asking for trouble.
Instead of being proactive with repairs, you’ll constantly play the game of “catch up.” Something breaks. You fix it. Wait for the next emergency to happen.
The problem with this strategy:
Maintenance costs go WAY up when you wait until the last minute to address repairs. Industry research shows every dollar you put into prevention saves you $3-5 in emergency fixes down the road.
Commercial buildings take a beating every single day. Cars, foot traffic, weather. If you’re not keeping up with routine maintenance, your costs will skyrocket.
Take parking lot striping for example.
You might not think faded parking lot lines are a big deal. But they lead to unsafe parking, ADA compliance issues, and can even cause lawsuits.
For property owners in Colorado, Asphalt Coatings Company breaks down parking lot maintenance costs in Denver to help with regional budgeting.
The moral of the story? Don’t wait until your commercial building is falling apart to budget for maintenance. Keep good records and always be thinking about the future.
Otherwise, you’re just spending money as problems happen. Instead of budgeting proactively, you’re constantly RE-budgeting.
How To Allocate Your Maintenance Budget
Alright. So how much money should YOU be setting aside for commercial maintenance each year?
There are a couple different formulas that property owners use. Don’t overthink this section. Just pick the one that makes the most sense to you. (Or use a combination of methods.)
Maintenance Budget Formula #1: Cost To Replace
The most popular way to calculate your maintenance budget is based on the current replacement value of the property.
Take 2-5% of this cost and set this money aside for annual maintenance. If it would cost you $2 million to rebuild your commercial building from scratch, your maintenance budget should be $40,000-$100,000 per year.
This works so well because the larger and more expensive your property is, the more maintenance it will require.
Maintenance Budget Formula #2: Square Footage
Another simple way to determine your yearly maintenance budget is by square footage.
Commercial properties should budget somewhere between $1.50 and $3 per square foot. That means a 10,000 square foot building should have an annual maintenance budget of $15,000-$30,000.
Keep in mind that high-end, premium properties may require $2.50-$8.50 per square foot. Dependent on age, overall condition of the property, and complexity of systems.
Maintenance Budget #3: 50% Rule
If you can’t remember the first two methods by the time you finish reading this article. Don’t worry.
Here’s a wild trick many property owners use.
They simply assume that 50% of all rental income is going to be spent on expenses.
Of course, we’re talking about expenses EXCLUDING mortgage payments or any principal paydown. Just think of operational costs.
So if you own a property that collects $10,000 per month in rent, you should budget $5,000 PER MONTH for upkeep. Including maintenance.
Parking Lot Striping Costs
When it comes to exterior maintenance, owners often forget about parking lot striping.
Did you know that parking lot lines are some of the cheapest maintenance items you can budget for?
Let’s look at a few numbers.
Commercial Property Parking Lot Striping Costs
- Standard parking lot lines – $0.20 to $1.00 per linear foot
- Individual parking stall lines – $4 to $5 per line
- Handicap parking spaces – $25 to $50 per space
- Arrow directions – $10 to $20 per arrow
- Pedestrian Crosswalk Lines – $50 to $75 per crosswalk
Depending on the size of your lot and how many parking spaces you have, you’ll probably want to restripe every 1-2 years.
A small parking lot with 30-50 parking spaces will cost between $300 to $700 to restripe the entire lot. Large lots with 100+ spaces may cost $1,500 to restripe.
Asphalt Sealcoating Costs
Parking lot striping doesn’t last very long if you don’t take care of the pavement below.
Not only does sealcoating protect your asphalt from UV rays, oil and chemical spills, and weathering – it also helps parking lot striping adhere better and last longer.
You can expect to pay anywhere from $0.05 to $0.25 per square foot for asphalt sealcoating.
Depending on the size of your parking lot, you’ll only need to sealcoat every 2-3 years.
Small crack fills in your asphalt will cost between $100 to $500 to have repaired. Larger cracks that continue to grow may require a full pavement replacement, which costs MUCH more.
How much money you should budget for parking lot maintenance depends on the condition of your pavement. Are there lots of large cracks? If so, you’ll obviously need to budget more money to take care of it.
How To Allocate Your Maintenance Budget
With any maintenance budget you should:
Prioritize Safety
Money should be set aside for important safety issues first and foremost. That includes:
- Broken parking lot striping that indicates handicap spaces
- Damage walkways and tripping hazards
- Dark parking lots due to broken lighting
Stop Tenant Shuffling
When tenants are constantly moving from one rental unit to the next – your property isn’t profitable.
One of the BEST ways to spend your maintenance dollars is on preventative maintenance.
Repair HVAC units before they break, repaint units before the paint starts chipping, restripe parking lots before the lines start fading.
A clean and well-maintained property will always retain tenants longer and keep them paying higher rents.
And that’s how commercial properties turn a profit.
Build An Emergency Maintenance Budget
It happens to the best of us.
You create a maintenance budget, you think you’ve covered everything…And then something unexpected happens.
You should always PLAN for the unexpected.
By setting aside 10-15% of your yearly maintenance budget for “emergency repairs,” you’ll never have to worry about your budget again.
Properties in Florida and other hurricane-prone areas should increase their budget to cover storm damage.
Wrapping It Up
If you don’t have a commercial property maintenance budget already, STOP what you’re doing and go make one.
Even if you’re in the middle of fixing a budget-busting emergency, you should be thinking about next year.
Here’s what you need to remember:
- Set your budget – using one of the methods listed above
- Allocate your maintenance budget according to importance
- Build in extra funds for surprise maintenance repairs
Commercial property owners who have a yearly maintenance budget experience far fewer “emergencies.” Not only will you save yourself a ton of stress – you’ll save money in the long-run too.
Including parking lot striping costs.
Your future self will thank you!
Mariah