Maintenance & CapEx assumptions

[Peter Skrzypinski]

Hello All! I'm a new member of BP and I'm trying to take my analysis to the next level. While I have always known that I need to account for Maintenance & CapEx expenses, I've just made sure that my "cash flow" (that's what I called it) was large enough to have some money set aside for future spending needs - but I never stressed too much about the precise amount as long as there was a couple hundred per unit per month available for those things.

Without belaboring the point, I've come to appreciate that I need to be more precise about this and I'm currently trying to do a post mortem on my first two deals and I now want to be sure I'm using appropriate numbers for my market. When I watch many of the webinars (generally by Branden and David) the properties they evaluate are priced substantially different than what I've purchased. Generally either: $150k or so or a bit higher at $400k or so. But my properties are worth somewhere in the $700k range - so I'm wondering if a 5% maintenance and 5% CapEx is right? Afterall - appliances, faucets, roofs, etc. all more or less cost the same. It doesn't matter how much the house costs - a fridge should cost about the same, and so on.

I'm trying not to come at this question with pre-conceived notions and just want to understand either why the numbers should always be the same OR get a better understanding of why these numbers can/should be based on the market and then try and get an understanding on how to go about figuring out what my numbers should be in my markets.     The properties are in New Jersey, if it makes a difference.

Peter