I am seeing two 12 unit Multifamilies in Milwaukee WI this weekend.
I’ve run the numbers a bunch and am having trouble coming up with a good number to budget for cap ex and repairs.
For Capex I have an estimate for what the roof, water heaters, interiors, etc will cost over the next 15 years. I’ve then divided that into monthly payments. Is this a good way of analyzing it?
For repairs, I’ve done it on a per door basis and have budgeted $100/door/month. That one I’m a little less sure of. Units rent for between 550-750 and the property is in decent shape (C class).
Any advice on how I should be thinking about or calculating these costs would be greatly appreciated!
Standard figure out average life of each item, cost divided by useful life to figure out cost per month. Roof in Milwaukee on a 4/12 pitch simple apartment should run $2.5-3.75 a sqft. 100/mo/door seems a little high for maintenance but that all depends on how you run things and classify what’s maintenance and what’s capex.
Depending on age and condition of the property, I usually estimate $400/yr per door in capex, and $1200 for repairs. That capex figure can come down a bit if updates and maintenance have been kept up really well.
Congratulations on considering capex! You would not believe how many people don't! Budgeting for Capex basically comes down to looking at the systems that make up the property and looking at the remaining useful life. 15 years is a good timeframe. I always assume that every 30 years you have to redo everything, short of the structure itself.
Plumbing and electrical has a typically a 50 year design life, but everything else including the front door and the driveway will probably need a redo. However, don't panic, because you should have more than enough equity after 15/20/30 years to cover necessary updates.
Maintenance is high with $100 per door if you really only look at in-unit maintenance, but maybe not a bad number if you meant to include exterior and operating expenses.
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