Estimating Maintenance & Capex Costs in Bay Area - Older Building

[Stephen Swanson]

Hi All,

I'm looking for a house hack in the Bay Area (SFH with ADU or 2-4 multi), probably an older building that is in good to rehabbed shape, in the $500K-$900K range. Rules of thumb of monthly 5-15% of rents for CapEx and 5-15% for maintenance seem too vague. If rent goes up or down 20%, suddenly my maintenance & CapEx costs go up or down 20%? Estimating correctly seems like the difference between a potentially profitable building (after moving out) vs a money loser. SF Bay Area landlords, do you have guidelines when analyzing older, maintained buildings online? During due diligence?

Thanks for any help!

[Darius Ogloza]

The key is knowing the life expectancy of various house systems (HVAC, roof, major appliances) and being able to assess where in the life cycle are the various systems of the house you are buying.  All of these rules around reserves and percentages are nothing but an attempt to assess these two numbers.  When I buy a house with a 2 year old roof, I will approach cap ex differently than when the roof is 20 years old, as in the former case I know I will not be replacing the roof during the tenure of my ownership.  Same with the water heater, the furnace or boiler, the quality of the paint job, etc.  Focus on what will need replacing when rather than on some cold average number that has no bearing on reality and you will be much happier in the end.