Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Gregory M. Bailey III, for the purposes of initial underwriting I think 15% combined for repairs and CapEx is good. If you get serious about a property you can look at all the CapEx items, estimate their remaining useful life and future costs, then figure out how much you need to put aside each month.
Homeowner · Elkridge, MD · Member since 2020 · 14 posts · 2 votes
6y
@Jaysen Medhurst I'm still trying to understand estimating CAPEX. I tend to be overly conservative and expect the worst. I appreciate you taking the time to reply to my post. Success to you!
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Gregory M. Bailey III, for the purposes of initial underwriting I think 15% combined for repairs and CapEx is good. If you get serious about a property you can look at all the CapEx items, estimate their remaining useful life and future costs, then figure out how much you need to put aside each month.
Specialist · Baton Rouge, LA · Member since 2018 · 117 posts · 110 votes
6y
You may also want to consider raising the vacancy allowance a bit. 8-12% is usually more reasonable/conservative. Additionally, management looks low at 6% unless you already have a property manager lined up. If you are passing all expenses to the tenant, then great, but if not you may have to consider garbage or water. Finally, I think the property tax may be a little high. I used a calculator http://www.tax-rates.org/ohio/jefferson_county_property_tax for an estimate and came up with $52 a month. It may not be incredibly accurate, but something to think about! The deal looks a little thin to me without knowing all the details.
@Gregory M. Bailey III, for the purposes of initial underwriting I think 15% combined for repairs and CapEx is good. If you get serious about a property you can look at all the CapEx items, estimate their remaining useful life and future costs, then figure out how much you need to put aside each month.
Thank you, Jaysen! I was just telling my wife that CapEx can be done once you get eyes on the property. The only problem with this is we may or may not be able to get on the property without putting in an offer, which goes against our rules. We don't want to put in offers without seeing the property first.
You may also want to consider raising the vacancy allowance a bit. 8-12% is usually more reasonable/conservative. Additionally, management looks low at 6% unless you already have a property manager lined up. If you are passing all expenses to the tenant, then great, but if not you may have to consider garbage or water. Finally, I think the property tax may be a little high. I used a calculator http://www.tax-rates.org/ohio/jefferson_county_property_tax for an estimate and came up with $52 a month. It may not be incredibly accurate, but something to think about! The deal looks a little thin to me without knowing all the details.
Good luck!
Travis, thanks for taking the time to provide input. Much appreciated. I wish that I had copied the website URL that I used to get the vacancy rate. Of course, I understand it's an estimate. I do plan on having tenants pay water and electricity. I think I will pick up the garbage fee. For the property tax, I used the Ohio Montgomery County Tax Assessor website to see what the current taxes are. Again, thank you for taking the time to provide input! I appreciate it and success to you!
Specialist · Baton Rouge, LA · Member since 2018 · 117 posts · 110 votes
6y
At $700 a month, if you have it vacant for the majority of a month, you already are well above that percentage. Whether that is due to one tenant moving and another moving in so you have to make repairs, a down rental market, or a bunch of applicants that you aren't comfortable renting to, things happen from time to time that may increase that percentage. Or you could have the first family that moves in stay there for 5 years and leave it how it was when they moved in, but I would not count on that.
Rental Property Investor · Member since 2018 · 42 posts · 10 votes
6y
@Gregory M. Bailey III
I’m a noob too. Did you use a bigger pockets calculator to come up with that spreadsheet? I’m starting to look in NE Ohio where I grew up. Happy hunting and good luck!