Expense Ratios - Small Residential Properties

[Eric Roth]

Hi All,

I'm looking at some 2-3 unit buildings in the Queens, New York area and putting together deal analysis models. I always thought ~50% was the suggested expense margin to estimate, but when actually putting together the model, my expenses are more like 25% of income. I'm worried I am missing something since this is much lower than I expected... I have Management (5%), Taxes, Insurance, and common Utilities (majority of utilities are separately metered), and then $1,000 per unit annually for reserves. Also am underwriting an 8% vacancy rate on income. 

Does anyone either in the same market or in others have some feedback on this? I'd love to hear what expense ratios you are running in your small residential properties, and if you have any suggestions on expenses that I may be underestimating or leaving off.

Thanks!

Eric

[Robert Biggerstaff]

I think that’s awesome that you’re looking at these items. What I do with my places as I figure out the major expenses and what it will cost on a monthly term. I have figured that a water heater cost about nine dollars a month. The cost for a roof on a house is about $35 a month.