Multifamily Operating Expense % in the Denver area

7 Replies

Hello,

I'd like to get an idea of the multifamily operating expense percentage in the Denver area.

I was told by a broker that it is around 35-40% of income with property management included.

I was thinking closer to 50% of income.

Just wanted to verify.

Thanks

Originally posted by @Mario J Perez :

Hello,

I'd like to get an idea of the multifamily operating expense percentage in the Denver area.

I was told by a broker that it is around 35-40% of income with property management included.

I was thinking closer to 50% of income.

Just wanted to verify.

Thanks

This will vary greatly depending the size, type, class, location and condition of the property. Also utilities can be a big expense on certain properties over others. You will see between 30% and 60%

 

Just to clarify (perhaps you know) that percentage is of the Effective gross income: Scheduled monthly rent add other income (rubs, pet, parking, laundry, etc), minus vacancy (i would use 5% for your market, the lender does). That will change your percentages around a bit. As mentioned the % of EGI can vary depending on the the property size, type, condition and expense breakdown. I see a range between 30%-55% in my Oregon market. Denver appears to be pretty similar.

For example,
If tenants are responsible for their own expenses compared do a building where the landlord pays that's $1000's (or 10's of) a year. If you initiated RUBS (other income in the calculation) in this scenario you would be able to significantly lower your expenses as a percentage of EGI.

@Mario J Perez  It's nowhere near 50% income. The 50% rule is BS in Denver.

25-35% is the typical range. Sellers ballpark near 25%, buyers 30%+. As a rule of thumb, I'll use 30%. if you're higher than 35%, there's something going on that needs to be addressed. 

The last handful of multis have been 25-30% range.  The other week we sold a 15 unit building with a Freddie Loan, which has strict underwriting. It came out to ~30% or so. It was a 1960's build near Five Points. 

Clarification: I'm talking <15 units, class B and C buildings that are in decent shape. Not the class A stuff  and not the really crappy stuff.

Originally posted by @Mario J Perez :

Hello,

I'd like to get an idea of the multifamily operating expense percentage in the Denver area.

I was told by a broker that it is around 35-40% of income with property management included.

I was thinking closer to 50% of income.

Just wanted to verify.

Thanks

 I know Adam Adams lives there and focuses heavily on Multi-Family. 

I would reach out to him to get more information about the Denver market.