What expenses to included when evaluating a property

Question

Greetings!

I am looking to invest in multi family properties in the future.

The largest dilemma I have, while trying to evaluate the properties for cash flow is making sur ei am including a representative list of expenses.

I underdtand that there will be "incidental" items that are unforeseen ( but I can budget for those)

Below is the list of expenses I use when evaluating a property, please let me know what you think I need to add. Your input is MUCH appreciated.

MortgagePMI (Plan on using FHA)Town TaxesGarbage/Recycling (If not included in Taxes)Insurance (estimate)Grounds Keeping (estimate)Utilities (Though I prefer not to pay any.

Look forward to your input!

Mo Olatoks · Answer

@Steve Olson, pleasure to meet you as well. I have been thinking of using 10% as the reserve for incidentals.

Wholeheartedly agree on getting the property inspected. especially since I myself, am not yet familiar enough to spot problems with the structure.

Steve Olson · Answer

Hi @Mo Olatoks, nice to meet you!  That list is a good start.  I would add in property management fees, but with you living there yourself you may be taking that on (I'm assuming that because you stated FHA financing).  You need to add in some kind of a maintenance reserve.  How much depends on the age of the property and what kind of condition it's in when you buy it.  For example, most of my clients buy brand new construction so we put in very little maintenance at first.  But with older units, there can be a lot.  You'll also want to inspect the units to verify what condition they're in and get a forecast on what turnover cost you'll have when those units go vacant.  Good luck!