INSIGHT REQUEST: How do you run your rough draft numbers?

2 Replies

Greetings Bigger Pockets members,

I am plunging myself into the Real Estate Investing world and trying to ingest as much high quality material as possible. In between listening to podcasts (and my first audiobook), reading my first actual book and reading forum/blog posts; I am practicing running numbers.

While the general 1% or 2% rule and 50% rule are an awesome rule of thumb, I want to hear more about your personal methods when budgeting for things like "Repairs and Maintenance", "Large Repairs", and everything else.

Now I know it's fairly straight forward to get things like Rental Property Insurance by contacting insurance companies and Real Estate Taxes by checking the books, is there any rules of thumb that can be used for those?

Currently I am running:

- Vacancy at 10% (I understand this fluctuates heavily by location)

- Property Management Fees at 8%

- Repairs and Maintenance at 12%

- Large Repairs at 5%

- Property Insurance based on Redfin Calculator

- Real Estate Taxes based on Redfin Calculator

* Rent is being pulled from Zillow

I am totally new and maybe it's a bit early to run numbers but I feel that it's good practice. I would love any input you may have!

Cheers,

Anthony

I don't try to split it too finely.  The temptation is too great to trim a little here and a little more there and end up really underestimating things.  

In particular, 8% for property management is low.  Around here for SFRs its more like 10% of collected rents plus half a month to fill a vacancy.  If you have one vacancy per year, that's 1/24th of your gross annual income, about 4%, to fill that vacancy.   That puts total property management at 14%.

If I'm buying locally where I would self manage, I use 36% of gross rents for vacancy, expenses, and capital.  If remote where I'd have to use a PM (I've not done this, yet), I use the hated 50% number.  THEN I look for anything that might push this higher.  I'm never going to use a lower number.

For rents I look at rentometer.com for a first cut.

If the deal looks reasonable at this level, then I'll look more closely for rents. I look at craigslist and try to find any local sources.

Originally posted by @Jon Holdman :

I don't try to split it too finely.  The temptation is too great to trim a little here and a little more there and end up really underestimating things.  

In particular, 8% for property management is low.  Around here for SFRs its more like 10% of collected rents plus half a month to fill a vacancy.  If you have one vacancy per year, that's 1/24th of your gross annual income, about 4%, to fill that vacancy.   That puts total property management at 14%.

If I'm buying locally where I would self manage, I use 36% of gross rents for vacancy, expenses, and capital.  If remote where I'd have to use a PM (I've not done this, yet), I use the hated 50% number.  THEN I look for anything that might push this higher.  I'm never going to use a lower number.

For rents I look at rentometer.com for a first cut.

If the deal looks reasonable at this level, then I'll look more closely for rents. I look at craigslist and try to find any local sources.

Thanks for the reply Jon! 

Using the numbers I listed in my original post, it looks like all expenses combined (including vacancy) I am running at just slightly over 50% for the past few properties I have ran. If I am still cash flowing after that it seems like it might be a decent deal then huh?

EDIT: I just noticed I post this in the wrong sub-forum. Please disregard :P

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.