What do you underwrite for an expense ratio on a 10-40 unit building in a C class neighborhood?
The overall rule of thumb is usually an operating expense ratio of 50% for any size property. If the property is stabilized with adequate CAPEX; the ratio could drop closer to 40%. If when you are reviewing a property you see the ratio over 50% on the trailing twelve month, there is the potential to lower expenses. Older buildings or buildings needing major CAPEX might require a higher repairs and maintenance budget (normally this is $500-$800 per unit per year). This would then go back to normal once you have completed the CAPEX.
@Charles Carillo Great info! Thanks for the input!