Estimating expenses on buy and hold SFR

4 Replies

For all you seasoned and experienced investors who have bought and held SFR properties for a number years:

I'm trying to see if I'm on the right track for estimating long-term expenses for SFR.

Background: Purchased first SFR last year, ~2,000 sq ft, built ~1985 in our local small East Texas town (slow appreciation) in a pretty nice neighborhood. We've had the same tenants the last 18 months.

Rent: $1,350/month

Mortgage, Ins, taxes: $960/month

Our initial plan/goal was to acquire properties and hold them for long-term (20-30 years+) to essentially have the tenants pay for the mortgage and we would make a decent cash flow profit annually and then eventually have a solid asset (trying to diversify investing, e.g. not having everything in retirement accounts/stocks)

Just recently the A/C had some leaks and is pretty much on it's last leg and needing a replacement (quote of ~$8-$9,000 installed + fixing leaks in duct work). This got me thinking about the long term expenses that most houses will need and does the overall ROI seem reasonable.

So I googled some info and tried to estimate life expectancy of house appliances, carpet, roof, etc and costs (item + installation), then figured out the monthly cost out. Also, I added a "maintenance/repair" category for minor things like fixing a leaking toilet, broken window, etc. (see below)

My main question is: Do these estimates seem reasonable to those of you who have done this for a while? And it seems the cashflow/profit is not great...I'm starting to wonder if year after year it's worth the trouble and expense to keep up the house to eventually have a paid for asset. (hopefully my rambling thoughts make sense :-)

Thanks in advance!

                                                    Total cost      Monthly cost

A/C unit (replace every 15 years) $8,000 $45
Roof (20 years) 10,000 42
Carpet (10 years) 3,000 25
Dishwasher (10 years) 500 4
Range (13 years) 700 5
Water heater (10 years) 1,000 8.5
Microwave (10 years) 300 2.5
 
Maintenance/repairs (minor)
125
Total   257

Mortgage, insurance, taxes                            960

Total expenses  =  $1,217/month

Rent = $1,350/month

Cash flow/month = $133

@Matt Larson .  

Maybe a little High on A/C. I just replaced on a 1650 SF house for $6100 (14 SEER). Suggest NOt going any higher than 14 SEER on Rentals. 

Should get longer than 20 Years from roof. Paid $8,000 for roof about 2 years ago. 

Overall, I think your cost estimates and life span estimates are good, as your estimates probably will compensate for some inflation in prices over next 5-10 years.

Originally posted by @Matt Larson :

For all you seasoned and experienced investors who have bought and held SFR properties for a number years:

I'm trying to see if I'm on the right track for estimating long-term expenses for SFR.

Background: Purchased first SFR last year, ~2,000 sq ft, built ~1985 in our local small East Texas town (slow appreciation) in a pretty nice neighborhood. We've had the same tenants the last 18 months.

Rent: $1,350/month

Mortgage, Ins, taxes: $960/month

Our initial plan/goal was to acquire properties and hold them for long-term (20-30 years+) to essentially have the tenants pay for the mortgage and we would make a decent cash flow profit annually and then eventually have a solid asset (trying to diversify investing, e.g. not having everything in retirement accounts/stocks)

Just recently the A/C had some leaks and is pretty much on it's last leg and needing a replacement (quote of ~$8-$9,000 installed + fixing leaks in duct work). This got me thinking about the long term expenses that most houses will need and does the overall ROI seem reasonable.

So I googled some info and tried to estimate life expectancy of house appliances, carpet, roof, etc and costs (item + installation), then figured out the monthly cost out. Also, I added a "maintenance/repair" category for minor things like fixing a leaking toilet, broken window, etc. (see below)

My main question is: Do these estimates seem reasonable to those of you who have done this for a while? And it seems the cashflow/profit is not great...I'm starting to wonder if year after year it's worth the trouble and expense to keep up the house to eventually have a paid for asset. (hopefully my rambling thoughts make sense :-)

Thanks in advance!

                                                    Total cost      Monthly cost

A/C unit (replace every 15 years) $8,000 $45
Roof (20 years) 10,000 42
Carpet (10 years) 3,000 25
Dishwasher (10 years) 500 4
Range (13 years) 700 5
Water heater (10 years) 1,000 8.5
Microwave (10 years) 300 2.5
 
Maintenance/repairs (minor)
125
Total   257

Mortgage, insurance, taxes                            960

Total expenses  =  $1,217/month

Rent = $1,350/month

Cash flow/month = $133

 I think you should be able to do a 3 ton AC unit for about half what were quoted.  (Have a Trane and a Rheem 3 ton for less than $4K.  (all new copper tubing)

I suspect your carpet life might be a little long, I think you will replace it more often., IMO I would avoid carpet if at all possible. 

We havnt had much luck with dishwashers, I think you may be a little optimistic on the life span for those.

Do you have a refrigerator?  or a Washer and Dryer that you are providing?  How about painting, we end up spending a fair amount on paint about every time we do a turn.

How about long term items like counters?  cabinets?  gutters?  bathrooms etc?

Overall, I really like the thought process for estimating your costs.

Don't do carpets

Don't do dishwashers

For rentals unless they're premium units I prefer "builder grade appliances"

I won't touch an AC unit.... but if it's required you can get them cheaper than what you have quoted.

I would do the roof myself and save the $$ but that's only if you like to do that kind of work.

Personally I take 5% of each monthly rent and put it into an account that I eventually use to spend on small expenses that require maintenance. This may include changing locks, adding, fixing or repairing screens for windows, changing faucets, etc. etc.

I also put 10% of the monthly rent and put it into a different account to pay for large ticket items like the roof, a hot water tank, furnace etc. etc. The second account I will spend at the end of 1-3 years ... I put both into separate accounts as it's easier for me to do the books and write off the expenses.