First time invetstor, single family home expense question

1 Reply

Hello all and thanks in advance. I've posted on another forum, not necessarily a forum for REI though and got mixed answers. I've done some research but also get mixed answers, so please set me straight.

I've researched a single family home, rental property in my town. It's currently being rented for $1125 by the landlord and admittedly he says rent should be closer to $1200, which is what the market bears he said and from what I've seen, would agree.

I've reviewed the following expenses. $56.25 (5% vacancy rate exp), $112.50(maintenance) $70.42 (ins.), $120 (taxes). Total expenses $359.17 or ~32% of rent. I didn't include utilities because they are charged to the renter.

From what I've read, the rule of thumb is between 45-50% expense of rent. What am I missing here? Am I underestimating vacancy (landlord has had 15 properties in this town for 25+ years and says his vacancy averages around 5% or less) or maintenance?

Hi @Drew T. ! Your expenses seem mostly reasonable, but I would suggest that vacancy is more a function of the landlord than the location. Just because an experienced landlord is seeing 5% doesn't mean every landlord can expect the same. I'd recommend you assume 10% vacancy.

Also, you seem to be missing management expense. Someone will have to deal with the tenant and their issues, either you or a property manager. Here in Atlanta management fees run 8% - 10% of the rent.

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