This dilemma has plagued people throughout time, across continents and across industries. Have you ever found yourself asking, “Should I repair this or should I replace it”? There is a good chance that you have.

            The reason this is such a common question is that a common theme in the lives of most people is the concept of getting the most use out of your products for the least amount of money. You already paid for it once. The question becomes, “At what point is it time to throw in the towel and start fresh?”

            Everyone knows of someone in their family or a friend that continues to pour money into something that is a money vortex. The car is always in the shop. Appliances are constantly being tinkered with and never running at full capacity. It seems every time you are over at their house, they are tearing apart another item that has broken down.

Why Having A System is Important

            If you value your time and take into consideration the Return on Investment, having a framework around how you make decisions for when to replace or repair is important. There is no value in debating or being on the fence about which is the right decision. 

            While not all decisions are black and white, there are some good fundamentals that you can use as a guide to determine whether or not your problem is repair-worthy or replacement-worthy. 

When Replacing is the Right Path

            The famed and fabled 50% rule. Many have heard of it, used it and misunderstood it. The 50% rule is often used as the rule of thumb for replacement questions. This is not just in property management. This is in almost all industries. 

• Companies with a large number of fleet vehicles use the 50% rule to determine whether a vehicle gets repaired or replaced. 
• FEMA uses this rule to determine if they will replace or repair a disaster-damaged building.
• Large property management companies determine their maintenance schedules for large items like hallway carpeting, boiler and heating systems and appliances by using the 50% rule.
• ETC, ETC, ETC

If industries worldwide use this method as a way to determine their replacement and repair needs, do you think its worth looking into? Definitely! How can you leverage the 50% rule for you?

What is the 50% Rule for Replacement?

            When it comes to replacements, the formula is this.

• Is the item in question past the 50% mark of its life span? 
• Are the repair costs more than 50% the value of the replacement cost?

If the cost to repair is 50% or more of the cost of replacement and the item is at or past 50% of its life span, replacement is likely the best option. If you choose to repair, it may be cheaper at the moment but the frequency and cost of repairs will increase as the item gets older. 

You could potentially spend as much as the cost of a new item on repairs over the span of a few years. At the end of this, you would end up with an old, faulty item instead of a new one at the beginning of its life span.

 It is important to note:

• Small appliances are not always cost-effective to fix and should be replaced, such as microwaves, dishwashers and garbage disposals. 

• Large appliances last longer and may be worth fixing. Follow the 50% rule to determine if repairing is the right path.

How Can You Apply The 50% Rule to Remodeling?

            The 50% rule applies to remodeling costs as well. When considering a potential remodeling project or a repair on a household system such as plumbing, carpets or HVAC, ask yourself the same question. “Is this system past the 50% point of its life span and does the cost of repair equal 50% or more of the replacement cost?”

            The answer to these questions will help you determine if a replacement or a repair is the proper course of action. By asking yourself these simple questions, you can make a more informed decision.

Centurion Property Management Can Help

            At Centurion Property Management, we pride ourselves on our ability to make things easy for our clients. That includes helping them answer these tough questions. Our years of experience and our dedication to excellent customer service help guide all of our decisions so you get the best return on your property, year after year.

            Reach out to Centurion Property Management today and see how we can partner with you to get the most of your real estate investment properties.