Don't use percentage guidelines. You need $ figures for most OpEx, with R&M adjusting with the age of the building, property taxes being specific for the county. Property management is the only one that's a percentage of rents.
If you want average per unit OpEx for a specific area, you need to buy the IREM report. It will give you everything you're looking for.
Got it. I do not. The closest I do to there would be Indianapolis.
I'd still look at the IREM report if I were you. It breaks it down by building type (elevator, low rise, garden) and by property age. They survey thousands of units in the market and give you the averages of all of the income and all of the expenses.
In Omaha, they surveyed about 6,000 units last year. For garden style apartments, average OpEx was $5,661 per unit per year. That's likely a lot more than the 40% guide you mentioned (depending on your rents). It's actually a really high OpEx number. Looking at the breakdown, Omaha's property taxes are double what we see here in Phoenix (average). Insurance is also double.
Michael: Your best bet would be to call a couple property management firms who have expertise in the asset size that you're pursuing and ask them what they're seeing across their portfolios. Alternatively, you could use the IREM report or check Costar. Local management companies will probably be your most accurate and cheapest resource.
Property taxes are higher here, they run about 2% of assessed value. Insurance costs are also higher due to frequent hail and severe weather. And for 5 to 25 units, most of those were built in the 60's, and lots of those during that period only have one water meter, sometimes one gas meter per building as well, and lots of mom and pop owners pay for water/gas/sewer. So you have to be cognizant of this and make sure you are able to implement RUBS or separately meter after you buy to improve your NOI. Feel free to PM me if you would like to discuss further.
The fastest way is IREM report. Another option is to get general numbers from local management companies. A long-term option is the get your hands on the P&Ls for every new listing that meets your investment criteria and create an ongoing database of operating expenses.
Originally posted by @Michael Trueba :
@Sam Grooms thanks that helps. Do you stick mainly to the Phoenix area? I’d love to hear how the market for multi family is there as compared to some of the others we have looked into.
Yes, Phoenix is definitely our focus right now. We seem to have found a niche here and deal flow is actually picking up because of that. Feel free to reach out (email is best) if you want to compare/contrast markets.
@Sam Grooms I looked up the IREM report but the sample sizes seem low. For example, for conventional apartments in the Tampa MSA, there are 33 garden, 4 low rise, and 3 high rise. Doesn't seem like a large enough sample size. What do you think?
@Theo Hicks I agree with you on the Tampa low rise and high rise. Not enough there to assume they're the average for the market.
33 apartments for the garden seems like enough of a sample size, though.