What percentage do you use for Cap Ex Expenses for recently rehabbed single family
I am trying to sharpen the pencil in regards to my financial model for the single family homes that we own. We currently use 3% but I am finding that is inadequate and I am wondering if anyone here had a back of the napkin number they use. I am sure it varies depending on the property and features like age of roof and appliances, etc.
Any guidance much appreciated.
Thanks,
-Sig
@Sigmund VanDamme sharpen the pencil and back of napkin are opposite statements. To do it correctly, take all of your appliances and major items (ie. roof) and amortize costs over the useful life. It’s also not rocket science, so learn to do it correctly the first time and you’ll have way better underwriting for future analysis.
One tip that I use is to reduce the useful life by 25% vs what’s noted online. So if a microwave has a useful life of 7 years, I say it’s closer to 5 years in a rental.
This gives you ratable spend over the long term, but you’ll surely have peaks and valleys in your spend profile, so ensure you have the reserves to carry the peaks.
Very helpful - thank you
