How much to assume for CAPex, vacancy, repairs for nicer areas

Question

I’m assuming 20% total for vacancy, cap ex, and repairs. Then 10% for pm.

Can I lower these figures if the houses are in good areas?

Chris Coleman · Answer

@Nicholas Daniels

If the property was rehabbed within the last 5-7 years so that there should be no major deferred maintenance issues, then you can generally go with 10% for maintenance and vacancy.

Older properties will tend to have more issues and thus warrant more.

Mike Dorneman · Answer

@Nicholas Daniels Your estimates fall within the appropriate range, however it’ll always be based on the property. For instance, some investors with grab a deal and get a tenant in ASAP to start generating revenue. In my opinion, this is very short sighted and usually doesn’t end well. On the other hand, you can renovate and replace / repair all systems and components of the house that can produce issues once tenants move in. In addition to cosmetic rehabs, I always view each property with the lens of, “what is going to generate a middle of the night emergency phone call”? Then I simply have said issue replaced or repaired, prior to renting the unit.

By following this method, we get save / reinvest about 85% of the funds we allocate for cap ex / repairs each year. Said in other words, fix it right first, then more often than not, you won’t need to do additional unexpected repairs. One thing to note, remember to save for those long term repairs that are inevitable. I.e. Roof, HVAC, etc...

Nicholas Daniels · Answer

@Nic Stergion

What about for cap ex? I’m assuming 20% for vacancy, repairs, AND CAPex.

Nic S. · Answer

@Nicholas Daniels it’s less about the neighborhood and more about the actual home. Get yourself a 3rd party inspection.

How much to assume for CAPex, vacancy, repairs for nicer areas

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