Multi Family Capex Cost

[Patrick Rowe]

When you buy multi family apartments how do you figure out how much to allocate for capex? Also do you bring a contractor with you or do you used a Multi Family inspection report?

[Andrew Johnson]

Patrick Rowe Most of the time I see 10% floated around as what to plan on spending for cap-ex. However, I'm not a huge fan of that. Hopefully, you know the age of things like the roof, HVAC systems, cabinets, etc. At least then you have a "best guess" of when they will go south. For example, if your roof is 27 years old it's best to "plan" for it to need to be replaced in 3 years. Odds are that cash-flow reserves won't build up enough in 3 years to cover that (maybe, who knows, but you get the point). The reality is you have to have enough in reserves to cover any likely near term cap-ex items (harder to guess when an HVAC system is going to decide it's done).