I am playing with the numbers to see if Pittsburgh is a market we want to invest in.
When analyzing the property, how much do you allocate for repairs/maintenance costs for older buildings in Pittsburgh?
Here's what I am taking into Expenses:
-P&I (principal and interest)
-Prop mng 7% (since it's a multiplex)
Logically, if it's a newly rehabbed property I'd do 5% for maintenance. Most Pittsburgh's buildings were built in 1900-1920 though... Do you go on a building by building basis to determine the % allocation for repair/maintenance?
I agree with the above. The property I bought was close to turn key. I allocated 6% R&M and 7% Capex. Older property would probably kick it up a little bit.
I can unhesitatingly tell you to get in bed with a local outfit if you want to buy fixers, and to go building-by-building on your estimates. Some of the residential multifamilies built from 1900-1925 are quite viable. Quite a few are falling down and should be condemned, but aren't because of incompetent and/or corrupt local governments. This is an extremely insular county and city that is well aware of its continuing population decline and doesn't take kindly to outsiders. There are also diversity and race problems and attitudes that are holdovers from the 1950s. The last thing you have to be aware of is the demographic age of the area. Greater Pittsburgh is among the oldest major metropolitan areas in America.
None of this means that there is no opportunity for real estate investors here. I ended up here almost by accident but I wouldn't move now and do this job elsewhere in the USA for anything less than eight figures.
Use 2000-4000 per unit for starters.
@Edita D. You mentioned 7% for property management, so I'll presume that you've been in contact with property managers in the area. A good PM should be able to give you their thoughts if they're managing 100's of units (new and old) in the same area. Ask what they would guess the percentage (or dollar amount) would be and then bump it but 25%. They won't know your specific property (but neither do any of us!) so it's at least a starting point.
@Edita D. We manage over 650 properties in the area so I can let you know more area specific what repairs will cost here. It will also depend greatly on the building itself and the age of the mechanicals etc...
8-12% is more typical. Depends on the area and the amount of work. Also will charge 80-100% of first months rent as a lease up fee.
If it is an old class C property, 20%-25% of income for maintenance would be appropriate.
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