Does The 50% Apply To Larger 30+ Unit Apartments

Question

Compare 30 SFH to a 30 unit apartment complex are very different. 30 roofs vs one large roof. So my question is, does the 50% still apply?

Brie Schmidt · Answer

@Colin Smith

- The 50% rule should only really be used to determine if a property is worth looking at, it is in no way a replacement for due diligence.  But yes, it does still apply.  While you have 1 roof with a MFH - you also now have commercial insurance, trash, sewer, utilities, lawn care, snow removal, ect.  All things a tenant usually pays with a SFH.  In fact, a lot of times the expenses are higher with MFH

Colin Smith · Answer

Very interesting. I can certainly understand the added expenses with utilities and ground maintenance, but at the same time I would have thought that one roof, fewer walls, etc. Thanks for the input! I really appreciate it.

James Syed · Answer

@Colin Smith

Welcome to BP.

Expense ratio for multifamily properties is between 45% - 60%. And it's about the same for single family rental because of vacancy rate and maintenance / repair costs.

These are guidelines and don not replace actual numbers.

Hope it helps.

Brie Schmidt · Answer

@Colin Smith

It is hard to say because every market is different.  Some areas it is customary to have water and heat included in rent, others you can sub meter.  If I had to choose between more or less than 50% I would say typically larger buildings are more than 50%

Colin Smith · Answer

@Brie Schmidt

Thanks for the response Brie. I absolutely know I should never use any rule to substitute due diligence. I often hear / read on BP that over time expenses are usually around 50% of the gross rental income. Do you find this to be true with larger apartment complexes? Or are they more or less, typically?

Thanks!

Does The 50% Apply To Larger 30+ Unit Apartments

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