I grabbed these numbers from 'The Millionaire Real Estate Investor' book. I've been adjusting the LifeSpan based on the situation. For example, If the roof was put on 10 years ago, I would change from 25 to 15...ect. I normally still end up with numbers around $175-$200 for the total per month. SO, when I go to use the Rental Calculator Tool...a lot of times this ends up being a CapEx % of around 20%. So I'll usually have Vacancy 5%, Repairs 5%, CapEx 20%, and Management of 10% . Am I doing this correctly?
nice chart, i don't think i read that book, if i did, i don't remember that chart/ the breakdown. If you are saying that the typical rent for the house is about $900 / month then figuring in all those expenses to make sure you are covered, then yes your CapEx would be 20%.
So is anyone else figuring CapEx like this? I want to make sure I'm doing this correctly because it is dramatically effecting the offers and outcomes. Thanks!
That's a good chart to start. Honestly, i think most estimate capex.
Using expenses looking something similar to this on my side
15-17 percent for insurance and property tax
10 percent for repairs
10 percent for capex
5 percent for vacancy
Or around 40 percent give or take
In my short time, it seems the repairs at 10 percent, may be too high.
You are doing it right. However, some of those expenses don't happen.
For example, not every house, has foundation work thats needed even if you hold the house 50 years.
$2500 for a repaint every 5 years is probably a bit high as well.
Based on each individual situation.
Your real life Capex, probably will be between 12-15 percent
Repairs between 5 and 8 percent of gross.
I account for 20 percent for capex and repairs.
At the end of the day, it's just estimates.
You need to account for all the things listed above. If you do that, on a percentage of rent, and the home still cash flows decently(100-200 a month) then you probably got a pretty decent deal.
If you factor in those things, and you are negative after paying the mortgage, or its thin, probably should look elsewhere.
How many units does the property have. For large multis, the rule of thumb is 250 per unit per year. 10 units yields 2500 in yearly cap ex. It also does depend upon the condition of the building.