Expense and gross rent income ratio?

Question

What percentage of expense/gross rent income do you expect for a 40- unit apartment building, built in the 1960s, class C building? 40%, 50%?

Kenneth Garrett · Answer

@Jingwen Dunford

A typical standard is 50% until you underwrite the investment.  Most are at 50% plus or minus 5%.

Good Luck.

Gino Barbaro · Answer

@Jingwen Dunford

I would not use % of income. If income is too low, then expenses will also come in low. You need to find out from a broker, property management company or a banker what it costs per unit to run the property in the market. In Knoxville, the type of asset you are referencing is around 4000 per unit for operating expenses, depending on repair budget

Gino

Justin Kane · Answer

standard is 50% but youll want to comb through all financials and metadata to find the truth

Gino Barbaro · Answer

@Jingwen Dunford

It depends on the age of the property, deferred maintenance. The repairs of a property will be higher when assets are older

Gino

Charlotte Dunford · Answer

@Gino Barbaro Hi Gino. Can you please expand a little on the "depending on the repair budget you've mentioned?"

Charlotte Dunford · Answer

@Gino Barbaro many thanks, Gino! That's great info.

Charlotte Dunford · Answer

@Kenneth Garrett thank you Kenneth. If the broker tells you it's 40%, that would be too low, right? If I underwrote it and their numbers still tell me 40%, is it possible that they are hiding some expenses?

Expense and gross rent income ratio?

Most Popular Reply