How to Run rental costs on new Construction (duplex)

Question

Wrapping up a new construction duplex right now. Torn between selling and keeping. Want to keep it, but when I account for all expenses the cash flow is really rough. My question is...how much should I allocate/factor in for Cap x and monthly maintenance on a new construction? Lessening those %s obviously greatly helps my monthly numbers but I don't want to run them too low. I plan on doing a 1031 in a a few years so in all likelihood I wont be addressing any of the bigger ticket items. Hope that makes sense. Thanks!

Glen Wiley · Answer

A rule of thumb is 1% of purchase price for annual maintenance (seems high to me but that is a common number). Be careful about assuming new construction wont have maintenance expenses - they often have break in periods of a few years while things get sorted out.

Allow about 1 month per year vacancy and include that in opex.

Consider what happens if you do not sell in a year or two, to quote mike tyson: everyone has a plan until they get punched in the mouth. Things happen so be careful about assumptions. Local market volatility, neighborhood issues, local large employers and national economic changes can change your plans for you.

LeeAnn Owens · Answer

Hi Charlie! You can sell a duplex for much more once it’s cash flowing, have you considered renting it, holding it for a year or so, then listing?

Robert-Lee Pass · Answer

Great Question! Im in the same boat. Im buying it tho not building it , i literally just made a post asking if the deal was "Good enough" a minute ago because of cashflow.

How to Run rental costs on new Construction (duplex)

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