The Differences Between Repairs and Improvements - Property Vista

December 18, 2018

The Differences Between Repairs and Improvements

From fixing leaky faucets to painting to the installation of a new water heater, on an almost daily basis property managers are dealing with some sort of repair or improvement. But, is there a difference between the two? Yes, both from an asset management perspective and a tax perspective.

 

Asset Management

As the property management industry continues to evolve and grow, more and more property managers are implementing an asset management approach to their role. This means putting a laser focus on driving value for the owner or investor.

Traditionally, a property manager oversees the operation of the properties, collecting rent, scheduling of maintenance and repairs, and interacting with tenants. Asset management, on the other hand, is tasked with boosting the value of the building and its profitability. These roles are often separate and distinct from one another as asset management has a much stronger emphasis on financial analysis, market research and revenue forecasting.

Typically, a property manager will be responsible for overseeing repairs, renovations and ensuring building maintenance. An asset manager will usually plan major capital investments like upgrading building systems to enhance water efficiency or reduce energy and utility costs. They will recommend upgrading common areas or tenant amenities to help keep the building competitive and maximize rent returns.

However, when property managers have a clear understanding of how the property is positioned within the portfolio and in relation to the competitive market, they can then use this to identify, evaluate and prioritize maintenance and improvement needs. A more strategic, “big picture” view of the property can inform everyday tactics. And, this insight into the investment life cycle ensures the viability of your building asset for the long term.

 

Tax Considerations

There is also a clear difference between repairs and improvements from a taxation perspective. Repairs and improvements fall into two categories: Current expenses or capital expenses. The Government of Canada defines a current expense as one that “reoccurs after a short period of time.” A capital expense is defined as providing “a lasting benefit or advantage.”

Generally speaking, when you undertake a repair due to general wear and tear (fixing a leaky toilet or sink) is considered to be a current expense. As well, when you require a repair to attract a new tenant, like repainting the unit, that is also a current expense.

Capital expenses provide longer term value or add value to the building. Replacing wooden steps on the front of a house with cement stairs is a capital expense. Redoing the HVAC system is a capital expense.

 

Create a Maintenance Tracking System

Property managers need to have clear view into the building’s systems, maintenance equipment and ongoing maintenance. Only this way can they see patterns. Has Property A needed far more repairs on its HVAC systems than Property B? Using a maintenance portal provides a complete maintenance tracking system and service history.

This can help to inform major capital investments. And, of course, for a property manager, having this data at your fingertips relieves the headache of trying to find the correct information in separate systems. It makes it easier to communicate information to asset managers, service technicians, and tenants.

 

How Property Vista Helps

Property Vista’s property management software produces customizable reporting and real-time updates on all aspects of your business – including maintenance and repairs. Our suite of tools makes it easier to focus on how to improve your investment’s value and return.

To see our pricing and arrange a demo, visit PropertyVista.com/pricing.

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Jack Beaton Sterling Karamar, Property Management
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