[Calc Review] Dissect this deal

2 Replies

@Demetrius Ward how did you arrive at your soft costs (vacancy,repairs, and capex). I like a minimum of $50 for repairs and $100 for capex. Vacancy of 5% is an average of 20 months before a turnover. $40*20=$800 in reserves for cleanup and painting between tenants. Is that enough. I like to use 8% or 1 turnover per 12 months. My area it costs me $150 per service call. I can build reserves of $450 per year that I can help supplement the vacancy repairs. My capex budget includes roof 25 year life span, floors, 10 year life span, hvac 20 year life span, appliances and hot water heater 12 year life span, bath and kitchen remodel 20 year life span, etc. Assume a roof costs $5000 to replace. $5000/25=$200 per year. That is if it brand new the day you buy it. Assume a 20 year old roof. You now have a 5 year life span, $5000/5=$1000 per year unless you are using your own money to replace. You also left out property management which will run you 10-12% of rental income.

@Tim Herman Thank you for the reply, my soft cost are averages so they are not specific for my area. If I were to dig deeper on this property I would be really conservative on my numbers. Also, this would be my first property so I would like to initially manage it myself so I can get the experience before I start to hire others to do it for me.  The breakdown you provided gave me a better understanding of how I should be approaching my numbers, thank you for that.