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Keeping Up with True Value: Issues of Depreciation That Shouldn’t be Ignored.


Of the three issues that negatively affect property value; physical deterioration, functional obsolescence, and economic obsolescence: physical deterioration is the issue that real estate investors and landlords needs to pay attention to.

According to MPAC; Physical deterioration is the most common cause of depreciation. As a structure ages, materials used in its construction wear out and as a result, the building loses value. Physical deterioration may also be affected by the amount of maintenance it receives (i.e., a property that receives regular maintenance will outlast one that receives little or no maintenance) (2016). Retrieved from http:// www.mpac.ca/PropertyOwners/Procedures/procedureForCostApproachForResidentialProperties

Owning rental properties comes with the responsibilities of maintaining the overall integrity and well-being of the structure as the property ages, as well as the physical wear and tear caused by tenants. Here is a list of 12 issues that affect physical depreciation and must be considered:

  1. Breakage and Damages: Cracked or loosened tiles, loose hinges on cupboards and doors, holes in dry wall, damaged ceilings, warped flooring, etc. When the physical integrity of the property is visibly damaged, there will be depreciation in value. Although certain items may require minimal expense to repair, an overall poor impression can devalue the true worth of your property.

  2. Effects of age on construction material: Roof, flashing, gutters, decks, windows, etc. Due to the effects of the sun, snow, and wind, these items generally have a lifespan of 10, 20, or 30 years. If you have an older property, it is important to take note of the original installation date, and determine when each item will need to be replaced.

  3. Normal Wear and Tear: Water-stains in sinks, tubs, and showers, minor marks or nicks on wall and doors, carpet worn thin by normal use, faded paint on walls, dark patches of ingrained soil on hardwood floors; are all examples of normal wear and tear on a property. Damage that wasn’t intentional, nevertheless is inevitable as the property ages.

  4. Loss in the physical efficiency: Windows, doors, and skylights lose energy efficiency with age. Heat loss, drafts, condensation, and frost can result causing cracks, mould, and financial loss.

  5. Heating/cooling issues: Change out HVAC filters. Failure to do so will place undue strain on individual heating and cooling components which will eventually stop working properly or fail altogether.

  6. Proper use of utilities: Making an effort to conserve utilities and energy consumption through education and an efficient maintenance plan is worthwhile. By having a basic understanding of the proper function of heating, cooling, water, gas, and electrical systems etc. you are able implement preventative procedures which minimizes loss.

  7. Moisture issues: dampness can easily encourage the growth of mold, a fungus

  8. Pest Control: Cockroaches, mice or other pests. The importance of effective pest control cannot be overstated. The cost of the physical damage can escalate very high within a short period of time.

  9. Wood destroyers: There are the seen, and also the unseen pests that requires proactive maintenance. The principal types of wood-destroying pests are termites, carpenter ants, carpenter bees, and bark beetles.

  10. Leaking toilets, faucets, and pipes: A very subtle leak, drip, or dribble may seem normal, however, continual water flow can lead to high water bills, water damage to floors and walls, and possible mould and rotting.

  11. Deferred maintenance: Delaying repairs or maintenance might be a good strategy with concerns with budgeting, however, deferred maintenance can also be costly if your scheduling is off.

  12. Neglecting overall maintenance and repairs: The neglect of any maintenance can lead to worse problems. It is necessary to develop a routine maintenance schedule that addresses all the preventative and curative needs of your property.

Consider the 12G House Maintenance System

Prior to, or in between tenants, our 12G House Maintenance System is a unique property management program designed to keep you up to date about the current condition of your investment property. A top to bottom maintenance inspection of your single family rental property that identities areas of concern; from cracks on walls, to rotted window frames, mould, through to safety issues, our inspection provides for the overall protection and preservation of your property. Know what work needs to be done before your tenant makes demands for repairs that may, or may not be necessary, allowing you the opportunity to plan, and budget for the necessary repairs in the future.

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