As I do my valuations, I'm wondering what everyone is setting aside for reserves and vacancy for Tampa area working class neighborhoods.
10 % before expenses for vacancy
Is that in line for the areas like USF, largo, Gulfport, Clearwater, Temple terrace, etc.?
Thanks in advance
The numbers are really up to you. Those can be fine. I tend to use
10% Cap Ex
I've found that keeping those reserves roughly in that 50% range is what really matters and can give you enough of a cushion.
Well, a bank will say that you will average 75% vacancy. With 50+ units, in 4+ years in Pasco and Pinellas counties I average 99.5% occupancy. It is rare for me to have a unit vacant more than a few days. I generally have a waiting list as I get lots of referrals from current tenants because I deliver a good product (fully renovated) at a fair price. I usually have my pick of tenants and thus average a very low turnover rate of about 2 tenant move-opts per year out of the 50+ units.
In regards to expenses for repairs and such, since I did all my renovations prior to putting my units on the rental market, it is extremely low. I figured an updated product will get me more in rent and less repair calls. So you can only figure out your maintenance budget based on the houses you have. Almost all of my units had new roofs (70%), new HVAC (70%), new bathrooms (70%), new windows (100%) etc. So for my portfolio, I only average about 5% for all maintenance and repair work as that includes the occasional HVAC or roof on the few that have not been replaced. Now to put that in perspective, I did $1.5M in renovations before I put these 50 on the market. So now with most of the renovations falling in the 5 or 7 year depreciation buckets, I get roughly $175K a year tax deduction.
So as alluded to, it is property dependent. If I did not do any renovations prior to renting...my phone would not stop ringing with renter complaints. I would then be spending a ton of money on repairs putting out fires. My business plan was to deal with those before hand so I can have a relatively smooth running rental business with just basic maintenance repairs that are required for the most part that we catch in our monthly inspection of each property.
I hope that helps.
That sure helps, I'm budgeting for a small rehab but now I'm seeing many of these units are occupied month to month. So I'm not sure if I put much energy into rehabbing now vs rehabbing as they vacate. What would you do??
50 units!! Wow I'm impressed. That's my goal.
I think 35-40% off the top is what you should be looking at as a starting point. Good job!
What do you mean off the top? offer price should be 35-40 % off ARV