Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Joshua Hollandsworth I run around in the commerical multifamily world. Therefore, I just ask for a T12 and double the variable expenses. I always want to be conservative and assume they are unreported. I also look at average life spans of roofs, HVAC systems, kitchen cabinets, etc. and basically plot out (based on age) an educated guess as to when that expense will come due. Rather than using 10% for cap-ex I ask myself: "How much money per-month will I have to save so the property can self-support (ie: pay for) that capital expense?" The downside is that it shifts overtime but I would always err to get a property to self-support so I don't have to come out-of-pocket for cap-ex. I doubt anyone would say my odd method is "generally accepted" but they don't write the check when the HVAC system dies!
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Joshua Hollandsworth I run around in the commerical multifamily world. Therefore, I just ask for a T12 and double the variable expenses. I always want to be conservative and assume they are unreported. I also look at average life spans of roofs, HVAC systems, kitchen cabinets, etc. and basically plot out (based on age) an educated guess as to when that expense will come due. Rather than using 10% for cap-ex I ask myself: "How much money per-month will I have to save so the property can self-support (ie: pay for) that capital expense?" The downside is that it shifts overtime but I would always err to get a property to self-support so I don't have to come out-of-pocket for cap-ex. I doubt anyone would say my odd method is "generally accepted" but they don't write the check when the HVAC system dies!
Cleveland, OH · Member since 2017 · 161 posts · 38 votes
9y
Thanks so much for the replies! And I remember reading about estimating CapEx In Brandon Turner's book. The chart that he "recommends" shows to put away 183/mo for CapEx on a BRAND NEW HOUSE! How much for an older one? This is really really hard to predict. I have been studying real estate for almost 3 years and this still remains a problem for me. Have you guys had proven cashflow when using 30% For these 3 expenses? I really don't see how any investor could make money on a financed 50k property putting away more than 30% .
Investor · Traverse City, MI · Member since 2016 · 19 posts · 4 votes
9y
I wish I had an answer for this too. It's a big variable cost. Mostly, it seems that investors have only been investors for a few years, and so they don't really have a long enough track record to say what this should be over 10 years.