Rental Property Investor · Member since 2018 · 7 posts · 6 votes
I bought my first deal and I am looking for my second one. I love analyzing deals every day and created my own spreadsheet to do it. On it I account for a monthly value of 5% of the rent for Vacancy, 5% for Repairs and 5% for CapEx. My Market is South Richmond-VA. Do those numbers sound realistic? How do I get accurate numbers?
Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
7y
It really depends on the condition of the property. On a brand new building 5% CapEx is probably fine. If you're any more than 0% through the useful life of any of the major systems (heating, roof, etc) you may need to adjust that number accordingly.
Same for Vacancy and Repairs. Is the building full of quality paying tenants? Or are you going to have to throw everyone out in the first year and endure heavy turnover costs in each unit?
Once stabilized the 5%/5%/5% thing usually works but it can often be very expensive getting it there.
Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes
7y
It really depends on the condition of the property. On a brand new building 5% CapEx is probably fine. If you're any more than 0% through the useful life of any of the major systems (heating, roof, etc) you may need to adjust that number accordingly.
Same for Vacancy and Repairs. Is the building full of quality paying tenants? Or are you going to have to throw everyone out in the first year and endure heavy turnover costs in each unit?
Once stabilized the 5%/5%/5% thing usually works but it can often be very expensive getting it there.
Rental Property Investor · Dayton, OH · Member since 2018 · 234 posts · 183 votes
7y
In almost all examples I have seen people will put 10% for vacancy, due to the fact that vacancy is the silent killer for Real estate investing cash flow. Lets say your property changes a tenant each year and you need nearly a month to repair/ replace everything and find a new tenant. That one month is 8.5% of your total income lost! One month may seem like a long time to do all this, but you always have the what ifs, what if the person I select drops out last minute? What if the there is a discovery of termites?
Granted you can mitigate this with systems that help you get tenants faster, and prep your property faster. Additionally let's say everything goes well and you don't need to dip into that extra savings. After you have reached a certain threshold of money in reserves you can then pull some out and use it for your next property.
Investor · Baltimore MD · Member since 2018 · 12 posts · 5 votes
7y
I always highball my numbers. For example, if it is a sfhI will throw a 100 at capex and 100 at repairs per month even though on the rent it might only be 900 a month, and if it can cash flow even with really high numbers then it might be worth trying to find more accurate numbers. But for each area repairs and capex are a different amount, for example, I live in great lakes so there is a lot of snow and moisture. So I would have to take those into account on top of a new roof or a broken toilet here and there.
For vacancy, you can usually look up the vacancy rate for your area or talk to other local investors to find the vacancy rate I know for my area after talking to multiple investors its about 6-9% but that is only because the rents are really high for the area due to property taxes. The best advice I can give is talk to the locals, even just homeowners they don't have to be investors. good luck and fair winds!
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
6y
@Luis Baumeier experience is the best teacher. You will get different numbers every year on different properties, so there is no "one size fits all" number for those categories. CAP Ex really doesn't apply to a SFR. That is a commercial term for large expenses like a parking lot or a roof of a very large building. A roof on an SFR should be something you write a check for every 30 years or so.