Help w/ Expenses and NOI

[Jeff Brown, Jr]

Hey everyone,

Recently joined the community, but have been interested in Real Estate for awhile now. I was hoping to get some insight regarding expenses and NOI. I have read different things and some estimates vary greatly (swinging potential properties from good investments to poor).

I live in Fresno, CA and will be purchasing my first rental in the area.

Here is what I have estimated:

• Annual Property Management: 10% of gross collected income
• Annual Vacancy Rate: 5-10% of gross collected income
  • 2017 -> rate was only 3% (7% was highest over 10yrs)
• Annual Release Fee: 50% of 1st month’s rent (not even sure what this is, but have seen it included)
• Annual Property Insurance: 0.8-1.2% of property purchase price
• Annual Maintenance: 5-15% of gross collected income
• Annual Cap Ex Reserves: Approx $1,500 (aware it depends on the age of property/components)
• Annual Property Tax: Approx 1.2% Purchase Price

Do those numbers/percentages seem reasonable?  

Any thoughts or insight would be greatly appreciated!

Jeff

[Kenneth Garrett]

@Jeff Brown, Jr

• Annual Property Management: 10% of gross collected income - This looks good
  
• Annual Vacancy Rate: 5-10% of gross collected income  - This looks good percent is based on your market
  • 2017 -> rate was only 3% (7% was highest over 10yrs)
• Annual Release Fee: 50% of 1st month’s rent (not even sure what this is, but have seen it included)  - I'm not sure what a release fee is.  The 50% is typically opertating expenses - not including mortgage (Principle and Interest).
• Annual Property Insurance: 0.8-1.2% of property purchase price  - I have never seen a calculation like this.  Call some insurance agents for quotes.
• Annual Maintenance: 5-15% of gross collected income  - This looks good, but it is based on the property.  Review the past 12 - 36 months of expenses.
• Annual Cap Ex Reserves: Approx $1,500 (aware it depends on the age of property/components)  - This is based on the age of improvements and building components.  I start at 10% of rental income, but then analyze the property.
• Annual Property Tax: Approx 1.2% Purchase Price  - Check with your local assessors office to confirm those numbers.  Do not assume a random percentage.  Property taxes can kill an investment.