Estimating expenses on 10+ unit buildings
4 Replies
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Haney Mallemat from Haddonfield, New Jersey
posted 6 months agoHi BP,
When you are determining a potential investment property where there are more than 10 units, what % do you use for monthly expenses such as:
1. CapEx
2. Maintenance
3. Property management
I know these are variable by region and specific situation, but I'm trying to run the numbers on a potential property and they seem slightly different than what the seller is providing, plus CapEx isn't mentioned.
I've already accounted for taxes, insurance, water/sewer, landscaping, common area electric, but I'd also appreciate any insight as to whether there are other unforeseen expenses that I'm not accounting for. ]
Thank you all for your help.
Michael Ruh Accountant from Boston, Massachusetts
replied 6 months ago@Haney Mallemat property management is usually around the 10% mark. For the other two, you are right, it is regional, situational, age specific, etc. - However @Brandon Turner had a great write up that will point you in the right direction
https://www.biggerpockets.com/renewsblog/2015/10/1...
Hope this helps!
Andrew Beauchemin Commercial Mortgage Broker from Philadelphia, Pennsylvania
replied 6 months agoHi @Haney Mallemat ,
I have to respectfully disagree with Michael's PM estimate. 10% could be used for SFH or duplexes, but for larger multifamily in Philly/South Jersey PATCO line I will usually underwrite 3-5% for Management/Payroll.
R&M: 1-2%
CapEx will vary the most, it's tough to give a ballpark estimate without knowing more about each individual property.. It's better in my opinion to have price estimates on individual upgrades, i.e. the cost of a roof, cost to renovate a bathroom, cost for a new boiler, etc.
Obviously these are just back-of-napkin estimates, so I'm open to hearing other opinions as well. (Percentages are based on stabilized annual Income, after accounting for vacancy)
Andrew Johnson Real Estate Investor from Encinitas, California
replied 6 months ago@Haney Mallemat Based on what you’re saying, I’ll just throw out “10% for each category”. But so much of it depends on the rent level that you’re getting. The roof costs the same whether you’re renting for $500 or $700. And renting a 1 bedroom/1 bathroom for $650 is different than a 2 bedroom/1 bathroom for the same amount. Flooring costs and per sq ft. painting costs will scale with unit size, even if the rent doesn’t. I know this doesn’t exactly help but maybe provides some perspective.
Michael Ruh Accountant from Boston, Massachusetts
replied 6 months ago@Andrew Beauchemin missed the fact that it was a ten unit, I agree with you - My fault
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