I haven't done my first deal yet. I'd like to BRRRR. Also considering turnkey but don't like that I can't get my money back out. I have been analyzing a lot of properties but can't seem to find a deal that makes sense using 10% vacancy, 7% maintenance, and 7% CapEx. Am I overestimating these costs? I like to play on the safe side but when I use these %'s, cash flow looks pretty poor on the properties I've looked at so far.
probably not. Be tough on your first deal. Many people get burned first time out.
@Kim Forgione , estimating those costs is for the long term. The hard part about starting out is that things are either going GREAT or HORRIBLE because you only have a single unit or a few units.
So, yes, your numbers are conservative, but probably realistic of what you might see those first couple years until you have a handful of units. By that time you will gain a lot of experience and will have enough units for the law of averages to work in your favor and even things out.
At that point you might hope more for 5% vacancy, 5% cap ex, and 5% or less maintenance depending on if you rehabbed the properties with a BRRRR rehab and took care of any deferred maintenance issues.
With BRRRR deals, I suggest looking for distressed properties. Vacant uninhabitable tend to work well. If you want something where the rehab is less scary look for an estate with lots of deferred maintenance and where the interior looks 40-50 years old because those tend to sell for less than market in some cases because they are sitting vacant etc.