As a buy and hold investor - I have budgeted the typical 10% for repairs but find it nearly impossible to stick to that amount. The majority of my properties are fairly new (all built since 1970 with 5 of the 9 built since 1990) . If an investor gets $1000/month rent one yearly water leak ; a sprinkler issue; garage door issue; and a few lights not working properly can eat up your 10% repair costs (not to mention more serious issues that can advise) . All investors must have a lot of similar issues come up over the course of a year.
Maybe it's just me but unless we want our properties to deteriorate and have a lot of deferred maintenance I find it nearly impossible to stick to this:
Please advise with any thoughts
Please respond bigger pockets land
I'm curious to see the responses as well.
the reality is: it is what it is.. and your dead on .. you cannot predict what your operating expense's for maintenance are going to be.. many use 10% as a number but remember were are those numbers coming from.. Mainly from those that sell these investments. and for a fresh rehabbed house ( as long as its done right) probably fairly accurate.
But there are issues you can't control like weather, tenant , dogs , etc etc.
What we have is investors buying SFR's for rentals... And when they buy them many times they do not have any operating history. As opposed to if you were buying say 4 plex's those the seller would have documented or should have documented operating cost over several years so you can see what to expect.
So based on your portfolio track it for a few years on the portfolio as a whole and see were you send up.. probably 10 to 20% is my guess as long as you don't have a tenant trash a unit then all bets are off.
I know with our portfolio ( I sold out in Oct 13) we had 350 rental homes of which 225 or so were sec 8... expense's were far higher than 10% average HUD turnover yearly alone was right at 10%.
My experience is about 14% to 23% including capitalized items. I find that my expenses are not related to how much rent I charge so my lower rent houses have a greater expense than my higher rent ones.
great point Bill on the lower end rentals.. many times the lower end will cost you far higher than the higher end rentals on a % basis that's for sure.
I know my 1500 dollar rents average closer to 10% but my 700 huds ( before I sold them ) were 20 to 25% EASY.
Great responses --
I only have higher end rentals that were rehabbed right and thought that would keep costs away for the most part but what I've come to learn is higher paying tenants expect more ; and ask for more. For example - Every little scratch on your new floor or any rust spot on a newer sink and often they feel more comfortable with everything in just as good of a condition as when they moved in.
Higher end tenants care about their credit score ; security deposit ; etc and get nervous if something can jeopardize any of this. Its not a bad thing to have tenants like this (probably a good thing) but it does keep your costs higher than one would expect.
I've just started out so keeping everything on a big master spreadsheet so I can start getting some stats going. So far I'm budgeting under 10% since where I invest (South Africa) costs seem to be very low. I think only time will tell.
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