Estimating expenses on 10+ unit buildings

4 Replies

Hi 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. 

Hi @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)

@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.

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