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Updated almost 9 years ago on . Most recent reply

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254
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John Matthews
  • Investor
  • San Diego, CA
56
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254
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Capex estimations

John Matthews
  • Investor
  • San Diego, CA
Posted

Anyone have any suggestions on how to estimate upcoming capex costs for bank owned properties, or properties where the seller doesn't know how old the roof is? (or other items where there's no sticker saying when an item was installed/purchased)

Most Popular Reply

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180
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155
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Chris Heeren
  • Investor
  • Janesville, WI
155
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180
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Chris Heeren
  • Investor
  • Janesville, WI
Replied

For my Buy & Holds I calculate a monthly amount to set aside into a separate account for Maintenance and Replacement costs. For these costs I physically have a checklist I fill out for each property and calculate an individual value instead of using a fixed percentage. Simply because on a $60,000 Triplex I have 3 of nearly everything vs a $80,000 Single Family Home with only 1 of each, percentages would be off for both properties.   

Here's an example of a Duplex I'm looking to close on next week and what I can expect to put aside in expenses and also take in:

2bd/1ba & 1bd/ba Duplex - Purchase Price $41,500

Income 1 $600, Income 2 $475,  Vacancy -$90, TOTAL INCOME = $985

Mortgage $220, Property Taxes $66, Management (6%) $65, Insurance $55, Water $60 TOTAL CORE EXPENSES = $466/mo

Snow Plow $21 ($250/yr), Lawn Care $0, Turn Over Cleaning $25 ($300/yr), Visits/Phone Calls $60/mo TOTAL MAINTENANCE = $106/mo

Ovens $400 x 2 / 8 yrs = $100/yr, Fridge $500 x 2 / 8 yrs = $125/yr, Dishwashers $0, A/C $0, Washer/Dryer $0, Water Heater $400 x 2 / 10 yrs = $80/yr, Furnace x 2 / 15 yrs = $267/yr, Roof $8,000 x 1  / 20 yrs = $400/yr, Carpet $2 x 600sf / 6 yrs = $200/yr, Yearly Total = $1,172/yr TOTAL REPLACEMENT EXPENSES = $98/mo

Total Avg Monthly Income = $985, Total Ave Monthly Expense = $670, 

Cash Flow = $315, Down Payment = $8,300, ROI = 45%!

I do my own Property Management and this house is already newly remodeled with current tenants so I won't realize these expenses yet, but I will ALWAYS keep those numbers in the calculations as repairs unexpectedly happen and I don't always want to be the one answering the phones.

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