As a residential real estate investor, one of the most important aspects of your investment is the quality of the property. But what many people don’t realize is that maintaining the common areas of a property can be just as important, if not more so, than the actual property itself. This article will discuss some common area maintenance charges you may encounter as an investor and how to best prepare for them.
What Is a Common Area?
Any place that two or more tenants regularly utilize is referred to as a “common area,” which means that no one renter has exclusive usage of that area. Common areas in residential real estate often include courtyards, laundry facilities, walkways, parking lots, and hallways.
What Is Common Area Maintenance?
A separate rent charge known as “common area maintenance” is added to the rent payment to cover any costs related to the property’s ongoing maintenance. It constitutes one of the three “nets” in the triple net (NNN) and is not designed as a profit center for a landlord as additional rent.
Maintaining the Common Area
The landlord and property management company are in charge of maintaining the common areas, not the tenants, so there won’t be any disputes about who is accountable.
The property manager oversees the area’s maintenance and operations, and CAM charges are frequently built into the rental amount. In commercial and residential leases, the landlord often fully covers these costs to avoid any confusion about who is responsible for what.
What Are CAM Charges?
A CAM charge is an additional rent imposed on the regular rent, primarily made up of maintenance fees for work done on a property’s common areas. The property’s landlord establishes the particular costs detailed in the tenant contracts. Below are a few popular examples, but they can vary significantly from one property to another:
Maintenance of Parking Lots
CAM fees cover the cost of sealing parking lots, repairing cracks, and resurfacing them as necessary.
Landscaping and Lawn Care
It might be costly to maintain if the residential real estate site has extensive landscaping. The cost of maintaining sprinklers/irrigation systems, mowing the grass, and pulling weeds are examples of CAM charges for landscaping.
Maintaining sidewalks is a safety concern; snow and ice must be cleared and broken areas repaired. It is in both the renters’ and the landlord’s best interests to keep them in good condition and delight in their comfort.
If a business property’s utilities are not separately metered, it is typical for tenants to divide the cost.
How Is CAM Determined?
CAM is typically computed annually and charged to renters each month along with rent. Property managers and owners will base these figures on last year’s actual spending for their annual budget because it is frequently simply an estimate of the actual costs.
The CAM costs associated with maintaining common areas can be divided into controlled and uncontrollable expenses.
- Anything that the landlord will have control over, such as cleaning supplies or parking lot upkeep, falls under the category of controllable expenses.
- On the other hand, uncontrollable costs, which include things like property taxes and building insurance, are beyond the landlord’s control.
Why Do CAM Costs Matter?
common area maintenance calculation concern both the tenant and the property owner in terms of their amount, timeliness, and payment.
CAM costs can account for a substantial portion of a tenant’s monthly rental expense. As a result, they must budget for both the monthly rent and the CAM costs to know their overall monthly expense. common area maintenance calculation are crucial to the property owner since they offer additional income to pay for its operational expenses, reducing the amount of money they must pay out of their pockets.
UnitConnect provides the best residential real estate software on the market. With us, you will experience the market’s most transparent, adaptable, and user-friendly technological tool. Our CAM software for real estate calculates a common area maintenance fee based on meter readings.