Apartment Complex Expenses?
Hey guys!
Trying to do some research on what the expected number for an apartment complex would run. I've run across a deal that has gotten me thinking, but I don't have a lot of solid numbers in my mind. I doubt I'll be able to move forward with the deal (a LOT bigger than what I've been playing with!), but it at least gives me a chance to figure out some hard numbers in advance. Consider this a good thought experiment :)
I've so far invested in just single family rentals, and usually my expenses are right around 35-40%. Which from what I hear is a relatively normal average. So I have those nailed down pretty solidly. I've seen 50% tossed about for apartment complexes, but again I'd rather figure out some solid numbers here.
So here are some real numbers, and I'd love to get some input/advice on them.
50 unit apartment complex, averaging right around $550/mo/unit.
Actual Gross Monthly Income: $27,610
Current occupancy is 96%, but I'll use a much more conservative 10%.
Vacancy: 10% ($2,761)
Maintenance is probably the biggest unknown. This particular building is in decent shape and has been maintained well enough, though it's had very little capital improvements recently (potential for increased rents with some rehabbing, but not going into that here...) But then I'm assuming there are things like landscaping and other general building expenses that I'm not used to factoring in. Take a stab at 12%?
Maintenance: 12% ($3,313)
Insurance and taxes are relatively decent around here, so I'm going for 8% for each.
Insurance: 8% ($2,209)
Taxes: 8% ($2,209)
Management would definitely be hired out, and I'm assuming I can stick with my usual 10%? (My SFRs I've gotten 8% with my current company, but I'm guessing they'd want to charge the full 10% for a medium size complex like this).
Management: 10% ($2,761)
So my biggest unknown and question for you all is about utilities. Does the landlord/owner usually pay utilities, or do the tenants? It's a relatively large expense if indeed the owner has to pay. I've just discovered RUBS - I'm assuming that's something I could potentially add for each unit. If I did, how precise would that number have to be? Could I just make up a number, say $40 for the smaller apartments and $50 for the bigger ones and call it a day? Or are you required to be very precise about it?
Again, just taking a stab at a number here, and going with $95/unit, but then look at charging each unit $40 for utilities, coming out to $55/unit, or basically 10%.
Utilities: 10% (2,761)
So total expenses are coming out to 58% ($16,014) including utilities, or 48% ($13,253) without utilites.
From the $27,610 gross monthly income, that results in:
Net Income: $11,596
The current asking price is $1,450,000, which also results in:
Cap Rate: 8%
So my 2 main questions are:
1. Are my numbers even close to being right? If not, what'd I miss?
2. Is this a reasonably good deal?
Thanks so much!
Joel