Underwriting apartment expenses - small properties vs. big ones
Hello BP!
Are expenses per unit significantly different in small apartments (10-50 units) versus large ones (100+ units)?
I came across a couple of listings for small apartments (16 and 36 units), where stated actual expenses were much lower than those I see on bigger properties.
E.g. for one of the properties expenses were $3396/unit/year (not counting reserves) but when I applied a typical expense breakdown that I use for 100+ units I came up with $5034 (including $300/unit reserves).
Of course, with that much of a difference neither of these properties make sense at the asking price even if I take broker-suggested potential rent growth at the face value.
But maybe I am missing something... Does it cost less per unit to operate a 36 units vs. 200 units on a similar class/age property?
I am tagging a few BP sages to share their wisdom:
@Ben Leybovich, @Brian Burke, @Tom Lafferty, @Brian Adams
Thank you
Nick