Multi Family Expenses

[Justin Frank]

What is a good rule of thumb everyone is using to calculate expenses on smaller multi family facility’s when doing a quick back of the napkin evaluation on a property (5-20 units)? I typically use 50% of the stated gross revenue on the property but a lot of times for smaller MFs I feel it is fairly high. Any thoughts?

[Justin Frank]

@Charles Seaman @Greg Dickerson @Matthias Wilson @Erik W. @Javier D.

Thank you guys for taking the time to respond. For some info on the building; it is brand new construction in a in a B class neighborhood in rapidly growing town so cap ex should be low for quite some time. I will not manage the facility, and the utilities are currently Paid by the LL. My plan would be to bill back utilities to the tenants however I do not want to write the deal up assuming that will happen. this is a 16 unit property so there will be no payroll expenses. Property management will be used at an 8% expense to myself. I have a really good idea of what expenses will be for this building so writing an offer on this deal should be pretty straightforward. I was just trying to get an idea of what folks may be using for quick back of the napkin evaluations on a smaller multi family. I was feeling like the 50% expense rule on some of these smaller properties was just too much and was making my offers a bit weak. Thanks again for the responses