In multifamily investing, the numbers on the surface rarely tell the full story. A property might appear to be a great deal based on the cap rate, location, or tenant mix—but if it suffers from deferred maintenance, it could turn into a financial sinkhole.
Let’s explore how seemingly minor repairs can quietly eat into your returns, and how to spot the danger signs before you buy.
1. What Is Deferred Maintenance?
Deferred maintenance refers to necessary repairs or upgrades that have been postponed by the current owner, usually to cut costs or improve the property’s short-term financials. Think leaky roofs, outdated electrical systems, failing plumbing, or aging HVAC units.
These issues often don’t show up on basic financial statements—but they’re hiding beneath the surface, waiting to hit your wallet.
2. The Financial Consequences
Let’s break down what happens when deferred maintenance is ignored:
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Roof damage can lead to water leaks, mold, and structural rot.
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Plumbing failures can destroy interiors and spike utility costs.
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HVAC breakdowns result in expensive emergency replacements and tenant complaints.
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Foundation issues can lead to costly lawsuits or render units unrentable.
Each of these hidden costs can destroy your cash flow, tank your NOI, and trigger unexpected capital expenditures—often right after acquisition.
3. Tenant Turnover and Reputation Risks
Renters notice when things don’t work. A broken elevator, leaky faucet, or unreliable heating system leads to tenant dissatisfaction, negative reviews, and ultimately higher turnover.
More turnover means higher costs for cleaning, painting, advertising, and vacancy loss. Over time, you’ll lose your best tenants—and your property’s reputation in the market.
4. CapEx vs. OpEx: Know the Difference
Smart investors budget for CapEx (capital expenditures) during due diligence. These are one-time, major improvements like replacing a roof or HVAC system. Unlike operating expenses (OpEx), CapEx doesn’t appear on your monthly income statements—but they dramatically affect long-term returns.
Without a realistic CapEx plan, deferred maintenance can quickly turn a profitable deal into a nightmare.
Conclusion
The cheapest deal isn’t always the best deal. Deferred maintenance can be a silent killer that chips away at your profits, your tenant base, and your peace of mind. The best investors walk into every deal with their eyes wide open, a reserve budget in place, and a clear plan to bring the property up to standard.
If you don’t fix it early—it’ll cost you more later.
