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Scott P.
  • Westborough, MA
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Multifamily maintenance/capex budgeting

Scott P.
  • Westborough, MA
Posted Jul 27 2014, 10:14

I'm looking at a multifamily building: about 100 years old, 6 units plus 2 long-term businesses, 4 of the units recently renovated, ~$700K to buy, $92K potential income. The proforma shows $1,200/yr maintenance (along with $2,400 for trash removal and $3,600 for water/sewer, so highly rounded $100/$200/$300-per-month numbers). The maintenance seems very low to me (although I don't think there is a lot of deferred maintenance.

I've done some research here (and elsewhere), and the recommendations for maintenance and capex vary greatly. I often see 10% as a rule of thumb for maintenance (sometimes 10%-15% or as high as 20%), which at 10% would be around $9,200/year. I also see $300-$600/yr/unit as  rule of thumb for maintenance, which would work out to more like 5% here at most.

I also see $250-$450/yr/unit for capex.

The real estate agent thinks budgeting 10% for maintenance is way too high, thinking it should be around $4,000 (factoring in another $1,800 or so for reserve for replacement).

What typically works best, a percentage or cost per unit? Would $5,800/year be realistic to budget for an older property like this? Any thoughts?

                       -Scott

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