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?

[Charles Seaman]

@Justin Frank that number definitely is high for properties with no payroll expense.  When you're looking at larger properties that have payroll, then 50% is a realistic number.  If you're looking at a well run smaller multifamily property where rents have been maximized (or close to it), then 35% to 40% is a realistic number.  If it's a smaller multifamily property where rents haven't been maximized, then that percentage will be higher and can vary widely from deal to deal.