50% rule as it applies to Condos?

2 Replies

So, people often say that you can expect to pay 50% of the market rent toward upkeep on a place. I'm looking into a condo foreclosure and putting together some initial numbers and wondering how people would apply this rule to condos. Would you just include the HOA dues in that 50% since they take care of roofs, maintenance beyond the walls, etc?

For example: Condo market rent is $1000 and HOA dues are $190. I've found that condos require so much less maintenance than houses that it seems like a reasonable assumption. But, I wanted to see what your opinions are.

PS. Please don't turn this into an HOA bashing thread. I'm really not interested and I don't completely agree.

The truth is your HOA dues will trade off your average maintenance cost. I own a condo and it fairly comes down to 50% rule. Here is a possible scenario.

Rent $1,000.00

HOA $190.00

10% Vacancy $100.00

Marketing/Gas/MISC - 2% $20.00

Propery Management -10% $100.00

Mortgage (If Any) $250.00

Expense $660.00

Cash flow $340.00 (Less then 50%)

Two of our condos' have been held more than one year as vacation rentals. Our combined income $45,369 with expenses of $24,125.92 for an expenses ratio of 53%. We manage them ourselves.

Vacation rentals usually have a management fee of 30% to 40%. Some of the expenses that we cover would be covered by the management. These include housekeeping-$6,910, marketing-$1,638, Some of the supplies-$2,161. We paid 23.6% of rents for these expenses.

Where I budget at least $2,000 for maintenance and cap. ex. on a single family residence I budget only $1,000 since outside maintenance is covered by the HOA.

Hope this helps eventhough the numbers are for vacation rentals

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