How Much to Estimate Maintenance on Rental Property - Los Angeles

[David Tipton]

I've started trying to value multifamily deals, but having some difficulty knowing what is reasonable to estimate for maintenance (i.e. repairs and capital expenses).  

Does anyone in the LA area have a general "rule of thumb" for estimating maintenance costs, at least for the initial evaluation stage?  Is there a certain percentage of the rent?  Flat dollar value per door?  

I would like to have a conservative estimate, but want to avoid being so conservative that I make every deal look like a loser.  Any advice is greatly appreciated.

[Raul Pelcastre]

Originally posted by @David Tipton:

I've started trying to value multifamily deals, but having some difficulty knowing what is reasonable to estimate for maintenance (i.e. repairs and capital expenses).  

Does anyone in the LA area have a general "rule of thumb" for estimating maintenance costs, at least for the initial evaluation stage?  Is there a certain percentage of the rent?  Flat dollar value per door?  

I would like to have a conservative estimate, but want to avoid being so conservative that I make every deal look like a loser.  Any advice is greatly appreciated.

David,

Here's what I do for my multi-family buyers:

• Yes it is hard to estimate for maintenance because of a lot of variables
• But I know its expense is less for more units, for things like 16+ unit buildings, onsite maintenance room for storage materials, onsite employees use less hours to do work orders
• Some entities even volunteer their residents to pick up grounds, hence minimizing your maintenance costs
• If hdsupply.com accepts your account they specialize in multi-family buildings and you don't have to use man power for delivery or pickups 
• And yes, you can do analysis paralysis but it might help you the bank's formula DCR
• The 1031 buyers look at expenses differently 
• Yes there's a number per door, e.g. if the units have been neglected you will spend at least one month's rent in turn ready unit expense    
• An organized well lubricated team should turn ready units in 2-3 days
• Pay close attention to the human factor, i.e. low self-esteem employees who will take longer to turn ready units or do work orders with poorly workmanship, theft, etc 
• In capital expenses, concentrate in a few and more expensive to start with, AC, plumbing, electrical