Calculating capex and repairs

[Bhargavi Karumanchi]

Hello BP,

I’m a beginner to real estate. I have been running numbers on several investment properties and found it challenging to estimate repairs and cap ex.I’m curious how everyone calculates these. Really appreciate your insights as it would help me analyze deals correctly.

[Brian Kantor]

I'm going to give a little plug here to Bigger Pockets' "Multifamilly Millionaire Vol 1", which comes with an estimator tool for CapEx and Repairs that I really like.

Prior to reading this book, I'd simply use the "% of rents" strategy, which I always found to be a little inaccurate because it's based on averages, and what rental property is "average", right? 

A brand new build with Class B tenants in a Class A neighborhood is going to have very different repair and CapEx expenses than a Class B property built in 1940 with Class C tenants, but where you just installed a new roof, windows and mechanicals. Every property is unique.

The book includes an algorithm that calculates both of these numbers starting at a baseline of $100 per unit per month for CapEx and Repairs and nudges that $100 up and down from there based on all of the specifics of your target property.