Analyzing multi-family: how much to allocate for repairs?

Question

Hey guys!

I am playing with the numbers to see if Pittsburgh is a market we want to invest in.

When analyzing the property, how much do you allocate for repairs/maintenance costs for older buildings in Pittsburgh?

Here's what I am taking into Expenses:

-P&I (principal and interest)

-Tax

-Insurance

-Prop mng 7% (since it's a multiplex)

-Utilities

-Vacancy 10%

-Repairs/Maintenance 5-25%

Logically, if it's a newly rehabbed property I'd do 5% for maintenance. Most Pittsburgh's buildings were built in 1900-1920 though... Do you go on a building by building basis to determine the % allocation for repair/maintenance?

Thanks!

Account Closed · Answer

I can unhesitatingly tell you to get in bed with a local outfit if you want to buy fixers, and to go building-by-building on your estimates. Some of the residential multifamilies built from 1900-1925 are quite viable. Quite a few are falling down and should be condemned, but aren't because of incompetent and/or corrupt local governments. This is an extremely insular county and city that is well aware of its continuing population decline and doesn't take kindly to outsiders. There are also diversity and race problems and attitudes that are holdovers from the 1950s. The last thing you have to be aware of is the demographic age of the area. Greater Pittsburgh is among the oldest major metropolitan areas in America.None of this means that there is no opportunity for real estate investors here. I ended up here almost by accident but I wouldn't move now and do this job elsewhere in the USA for anything less than eight figures.

Rob Beardsley · Answer

If it is an old class C property, 20%-25% of income for maintenance would be appropriate.

Anthony Angotti · Answer

@Edita D.

8-12% is more typical. Depends on the area and the amount of work. Also will charge 80-100% of first months rent as a lease up fee.

Alex Deacon · Answer

@Edita D. We manage over 650 properties in the area so I can let you know more area specific what repairs will cost here. It will also depend greatly on the building itself and the age of the mechanicals etc...

Analyzing multi-family: how much to allocate for repairs?

Most Popular Reply