Multifamily Repair Budget per unit

6 Replies

I am under contract for my first multifamily deal, a 20-unit property in Charleston MSA. 

I am doing some forecasting and wanted to get some thoughts on what people budget annually per unit for repairs (including unit turns but excluding $300 of CapEx reserve). I know the exact number may depend on many factors such as age of building, quality of units and so on, but would be great to get people's thoughts on where they shake out usually.

Thanks!

Originally posted by @Mike Ball :

@Sam Grooms thanks Sam! What factors would make the difference so big between those markets? The wages can not be 40-50% different between the two markets.

Weather is a big one. Type of construction is another factor. Materials also have different costs in different markets. Labor is another portion of it, like you mentioned. 

Note that this difference in expenses between markets doesn't just apply to R&M. It applies to almost every line item. You'll need to underwrite to your specific market for expenses. For income and economic loss, you'll need to drill down to the submarket. 

We noticed early on that Phoenix had lower operating expenses than almost every other market. 

Originally posted by @Mike Ball :

@Sam Grooms thanks Sam! What factors would make the difference so big between those markets? The wages can not be 40-50% different between the two markets.

 Mike, most of the cost will be in property taxes, insurance, and maintenance (due to weather). For example, I can buy a 100-unit community with a property tax bill of about $50,000, or $500 per door. That same community in your neck of the woods is likely to come with a property tax bill of $120,000 - $150,000, which could add as much as $1,000 per door to your overall OpEx. 

Next, insurance. I pay about $150 per door. You are likely to pay closer to $300 per door. Why? Because your pipes freeze and mine don't. Because your topography is hilly, which means water issues, while I'm in the desert - flat and dry. Because your sewer infrastructure is older. Etc. 

The R&M budgets will reflect similar realities. If you have a flat roof in an environment which experiences lots of rain, boiler, chiller, snow, etc. it simply costs more to keep up.

So, what we have in the end is that it may cost me $4300 per door to run my apartments, but it may cost you $6,000 per door to run a similar community.

Like you already mentioned, this will greatly vary depending on overall condition, age, amenities, etc. We are typically $350-$500/unit for R&M and $300-$400/unit for unit turns. I would consult with some local property management companies to see what they are typically seeing. In my opinion most people under budget for those items.