Somerset, NJ · Member since 2016 · 33 posts · 13 votes
Hey BP community-I know there isn't a set formula that can be used to reliably calculate how much one should set aside for repairs and maintenance on a buy & hold rental, but I've heard the average of ~$100/month is a safe estimate for a SFH while listening to a BP podcast episode last night. Taking this into consideration is it then safe to assume that if I'm analyzing small multi's that I should be calculating to set aside double, triple, or even quadruple that amount (depending on duplex, triplex, etc.)? I know there are other variables to consider when calculating this number (e.g. age of the property, current condition, etc.), but I'm looking to see if I'm in the right ballpark. For reference most of the properties I've been looking into have been ~100yrs old, and most have been renovated/updated. Thanks in advance for any input!
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Daniel,
Typically you want to budget by the door for multifamily. The less units the more you should budget per door as 1bad incident can cost a lot of money relative to the income.. The amount would be based on the condition of the property as you mentioned. $100 a door is a good general place to start for well maintained units.
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Daniel,
Typically you want to budget by the door for multifamily. The less units the more you should budget per door as 1bad incident can cost a lot of money relative to the income.. The amount would be based on the condition of the property as you mentioned. $100 a door is a good general place to start for well maintained units.
Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
7y
@Daniel Rivera I hate using rules of thumb for things like this. It's okay to get a general idea if you're even in the ball park (price wise), but never depend on it. I've seen markets swing from 45% to 60% expenses (based on gross rents).
A better method, and not that much harder, is to find a quality property manager or two, and ask them "what is your average annual operating expense for an asset like this". Good PMs know almost exactly what it costs to run a unit on an annual basis. This goes without saying, but finding a PM that specializes in the asset that you're looking at is critical.
For properties that are 100 years old, i'm guessing they are urban, in established and progressive cities, and have complex infrastructure. I would say that you need to determine (in no particular order) regulations on rehabbing, sewer/tap condition, asbestos, mold, whether you're in a historical location or not, landlord/tenant laws, gas line condition, etc... all those things can be detrimental to your expense line.
It's all a guess until you have some data, which unless the previous owner has, will take several years to get. Also depends on if you are doing the work (some or all). $135 for a plumber to come out and unclog a shitter in 2 minutes or 5$ in gas for you to do it.
Let the "I'm not a plumber, I'm an investor" arguments commence.
Specialist · San Antonio, TX · Member since 2015 · 909 posts · 297 votes
7y
very true @Account Closed, you can presume based on local and experienced costs, but if you have none then do your research and use the standard factor rates
Typically you want to budget by the door for multifamily. The less units the more you should budget per door as 1bad incident can cost a lot of money relative to the income.. The amount would be based on the condition of the property as you mentioned. $100 a door is a good general place to start for well maintained units.
@Daniel Rivera I hate using rules of thumb for things like this. It's okay to get a general idea if you're even in the ball park (price wise), but never depend on it. I've seen markets swing from 45% to 60% expenses (based on gross rents).
A better method, and not that much harder, is to find a quality property manager or two, and ask them "what is your average annual operating expense for an asset like this". Good PMs know almost exactly what it costs to run a unit on an annual basis. This goes without saying, but finding a PM that specializes in the asset that you're looking at is critical.
For properties that are 100 years old, i'm guessing they are urban, in established and progressive cities, and have complex infrastructure. I would say that you need to determine (in no particular order) regulations on rehabbing, sewer/tap condition, asbestos, mold, whether you're in a historical location or not, landlord/tenant laws, gas line condition, etc... all those things can be detrimental to your expense line.
Hope this helps a bit.
Great, thanks for the direction-always appreciated.
Somerset, NJ · Member since 2016 · 33 posts · 13 votes
7y
Originally posted by @Account Closed:
It's all a guess until you have some data, which unless the previous owner has, will take several years to get. Also depends on if you are doing the work (some or all). $135 for a plumber to come out and unclog a shitter in 2 minutes or 5$ in gas for you to do it.
Let the "I'm not a plumber, I'm an investor" arguments commence.
Haha-first thing that came to mind as I was reading this. Thanks for the input.