rental operating expenses--ouch!

2 Replies

Hi All,

First let me say, I love reading this forum. I have a cautionary tale that may help a lot of newbies. On this forum, I have read several times to caluclate operating expense at 45-50% of the gross rents. I thought that was an inflated percentage to help protect the new investor from disaster. Now consider the current situation in my local area.

I live in a developed, unincorporated area with private roads, sewers ect. The local sewage system needs serious updating and every resident is going to get an assessment of about $15,000. There is a resident who owns four rental properties here. This assessment is going to equal about a year of gross rents assuming 100 occupancy, which they usually don't get. Furthermore, this person bought in 2005 and can't get what he paid for this properties. You can imagine, he is not sleeping well at all.

Newbies REALLY do the math, REALLY know your area and REALLY think ahead!


Robert 12

That's great advice Robert. There is a reason that the experienced investors all use formulas when considering a property to purchase. These are what keep you out of trouble (fr the most part).

Thanks for the cautionary tale. Similar situations also tend to come up often when some kind of HOA is involved.