Whats the typical calculation for rental propety ?

Question

Hi,

When talking about expenses for rental property, is it typically half of your gross rents are your expenses ?

Thanks

J Scott · Answer

Over the long term, that seems about right.  Over a shorter period of time, it's going to be highly dependent on the condition of the property.

For example, before I rent a property for the first time, I'll do a basic remodel and ensure that everything is working.  I expect $0 in maintenance costs for the first year or two.

But, if I didn't do that remodel prior to renting, the first tenant may find lots of deferred maintenance issues, and the first year of maintenance expenses could be 25% or more...

Anthony Nelson · Answer

I agree with J,

It all depends on the maintence and rehab done on the properties. For example I am buying a rental right now and it has a new roof, windows, siding and mechanicals. So my capital expenditures should be very low, if any, depending on the amount of time I keep the house. So im only adding about 5% of the rent for maintence, which should really be closer to 0% of the next few years, but better safe then sorry.

Also it is a good idea like J said to do the maintenance up front it will save you the headache and a large bill in the long run, I learned that one the hard way!

Jonathan H. · Answer

just reviving an old thread here.

Im looking at some properties and in some cases, I cannot get the numbers on previous maintenance.

Should I just go with 10% of the rental income for Maintenance? 
More? Less?

thanks guys

N/A N/A · Answer

A mortgage company will use 25% for vac and expenses, but I always use 33% to make sure I cover ever detail.  This does not include insurance, PMI, or your mortgage payment.

Ryan Webber · Answer

A generalized percentage of rent won't be accurate.  I use a percentage for vacancy and for maintenance (normally 10% for each), but if you are referring to PITI (principal, interest, taxes, and insurance) than the rent has nothing to do with it.  What you bought the property for, your interest rate, your term, your insurance rate, and your property tax rate will all vary depending on your market and your loan.  You might develop some type of factor to utilize with what the price is (i.e. .85% of sales price), but when actually crunching numbers I would recommend calculating all of these out.

Whats the typical calculation for rental propety ?

Most Popular Reply