As a new real estate investor, I've been leveraging the BP rental property calculator to analyze deals and I keep running into the same issue... the results of the calculator are highly unfavorable with every property I analyze. I'm starting to think I'm highly overstating my expenses and that is why I continue to see unfavorable results (specifically negative cash flow). I'm currently setting my Repairs and Maintenance expense at 10% of monthly rent, Vacancy at 6%, Cap Ex at 10% and Management Fees at 8% (the calculator advised me to use these %'s). My question is, to more experienced investors, are these realistic expense percentages? It seems as though these are the primary expenses that are causing my negative cash flow on paper. I'd love to get your insight, and greatly appreciate the advice!
Hey @Mitchell Hamilton, the amount you budget for each line item will depend on the property. For example, you will want to have more CAPEX and repairs for an older property than the one you just rehabbed.
However, for the purpose of analyzing deals, I use 5% for CAPEX, 5% for repairs, vacancy at 5% (this is probably what your lender will use but double-check with them), and 8% for property management.
Hey @Mitchell Hamilton, the amount you budget for each line item will depend on the property. For example, you will want to have more CAPEX and repairs for an older property than the one you just rehabbed.
However, for the purpose of analyzing deals, I use 5% for CAPEX, 5% for repairs, vacancy at 5% (this is probably what your lender will use but double-check with them), and 8% for property management.
@Mitchell Hamilton generalizing expenses is not a good idea. I would look at asset class. I would note where leasing is factored into vacancy. 8% is just for management and not including leasing. For capex its better a general flat fee number based on home size or if its a condo or not. Like $75 for a rowhome. If you have a $4000/month rental it will almost surely be less than one thats $800/month as a water heater in the $4000/ month place is not 5x more than the $800/month place. Same thing with hvac, etc.
It’s probably just that your deals aren’t any good More than likely . You should be able to be conservative and still cashflow a couple hundred bucks a month , if not move on to another