How to use BiggerPocket calculators

Question

I’m a newbie and just joined BiggerPockets as a Pro. I have practiced using the calculators and there are terms I don’t understand and don’t know where to find the data. Can someone point me to a training that explains the calculator criteria boxes and where to find the information on the web? Specifically, the rental calculator and fix and flip? Thanks!

Tiffany Watkins · Answer

@Tim Herman Thanks. I was wondering how to do that.

Tim Herman · Answer

@Tiffany Watkins You need to click on the names outside the box so people are notified that you replied. The name should be in blue in the comment box. Good luck on your real estate journey.

Tiffany Watkins · Answer

@timherman Thank you so much! I’m on it.

Tim Herman · Answer

@Tiffany Watkins $150 is what my average repair bill is. I use $50 per month minimum You can call a plumber and ask him how much he will charge to repair leaking faucet or toilet. Call drain cleaner and ask them what it costs to snake a drain. That gives can idea of your repair costs. If i save 5% on a $1000 per month or $600 per year and only have 1 repair I save $450 to paint the rental between tenants. Vacancies are easy enough to find out. Call a couple of PM companies ask what the vacancy factor plus ask what they charge. Most will be around 10% of gross rents. Some will have a rent up fee.

Tiffany Watkins · Answer

@timherman

Thank you. That is very helpful. It is the soft costs that I would like to know more about. I appreciate you took the time to answer some of them. I understand your paragraph about Cap Ex. So if I have a roof that is 15 years old, I would have to divide the cost of a new one by 5 or 10 years to be safe. Correct?  I wonder if there is a way to find out averages for my type of property, particularly on vacancies and property management charges. Also, why do you use $150 or 5% for repairs? What experience has led you to those numbers? How would I be able to have a good estimate vs a stab in the dark at estimating repair costs? Is $150 a good rule of thumb? Thanks for your help!

Tim Herman · Answer

@Tiffany Watkins what don't you understand. ARV is what the property could be sold after fix up. If you buy a turnkey property the arv will be the same as the purchase price. Repairs are estimated by having a contractor walk the property with you. You can estimate by calling paint contractors, drywall, plumber,etc and ask what they charge to do a room or by the square foot and applying that when you do your initial walk thru.

I divide my costs into hard and soft costs.Hard costs are known costs. Taxes see assessor's office, Insurance get quotes from agent(landlord policy). Utilities if paid by landlord. Get a t-12(trailing 12 month income and expense ledger) or profit and loss from the last two years. Mortgage use non occupied rate unless house hacking.

Soft costs are variable and you don't know when they occur. Vacancy usually expressed by a percentage. I use 8% or 1 month vacant per year. 2% vacancy means you won't have a turnover for 50 months. 2/100=1/50.

Repairs can occur anytime. My area the most common charge is $150 per service call. I like to use $50 per month or 5% whatever is larger. I like to build up a reserve between turnovers to allow me to paint between tenants.

Capex the newbie killer. I use $100 per month minimum or 10%. Yesterday my furnace crapped out. Have to replace it on Monday. Had enough reserves tp pay for it. Lasted 3 years longer than my estimated lifespan. 23 years vs 20 years. Here is how much money I should save per month for the heater. $2800/20 year life span/12months in a year=$12 per month. You can make a spreadsheet or use the one that @ Sam Tato created to estimate how much you need to set aside each month. Roof 25 year life span, Floors 10 year life span, appliances and hot water heater 12 year life span, bath and kitchen remodel 20 year life span,etc.