All Forum Posts by: Kris Wong

Each property manager will have their own cost structure, but I have typically seen:

• 8 - 10% of collected rents/other income (late fees, laundry)
• 75 - 100% of first months rent for a placing a tenant
• Some charge a lease renewal fee of $100 - $300
• 10 - 15% for maintenance and repair work that they manage

This will change if you start moving into larger multifamily, or commercial. Some property managers have also started moving to a fix cost fee structure, instead of a percentage of monthly rents.

The most precise and accurate way to calculate CapEx is to:

1. List out all CapEx items for a particular property (Roof, A/C, furnace, appliances, flooring, hot water heater, etc...).
2. Determine the approximate lifetime and replacement cost of each item.
3. Determine the approximate useful life remaining for each item at the property.
4. Aggregate this information to determine a monthly reserve amount.

Obviously that's a lot of work, but it's an exercise that I recommend everyone who is new goes through at least once or twice on a property before making an offer. Once you have a good feeling for it, you can use shortcuts like a percentage based calculation.

A lender will not mandate your replacement reserves unless you're working on a large commercial deal. Generally speaking, the more expensive the property, the lower the CapEx needs to be as a percentage. For instance, the cost of a new shingle roof is determined mostly by the size and layout of the roof, not the value of the home.

I follow the approach as described by @Neil Henderson. Couldn't have said it better myself. Multiple asset classes, multiple geographies, multiple operators. You can develop your own niche - as @Joe Splitrock has. In that case, you may want to consider placing some funds with another operator that has a different niche. For instance, maybe someone that's buying large multifamily properties in Dallas, TX. The important part is finding people [partners] you trust.

That's a very interesting statistic. What is the source? I would love to read more.

Also https://www.prominenttitleagency.com/.

https://www.gfh-law.com/

You found a triplex in the MLS that will bring in $2300 a month in rents, with a purchase price of $127,000? Right off, either those rents are not realistic, or the place is about to collapse, or it's in a very undesirable neighborhood.

If I understand your question correctly, CapEx and replacement reserves are the same thing. What you are referring to as "reserves" sounds like cash flow to me. If you are appropriately accounting for expenses, as well as CapEx, then what's left over is your cash flow.

I feel it's worthwhile to present the dissenting opinion here. I assume you are inquiring about Brad Sumrok and his AIM event/program. The answer to your question really depends on you. As far as paid mentors go, Brad's program is generally considered to be one of the best wrt. multifamily. I know several people that are in the program that love it. He definitely has helped many of his students do deals, and continue to do deals. You can easily make that $20K back, and much more, with just one deal. The question is, do you need the jump start he's offering? Would you feel better having all of your team members already lined up for you, a large network of passive investors, and multiple people to review your deals? Also keep in mind that Brad has hundreds of students, which amplifies the competition in the markets where his students are concentrated (DFW mostly). I highly recommend that you attend the Austin AIM meetup, the first Monday of every month at the Quest IRA office at 7PM. I also recommend that you attend Ken Harris's multifamily discussion group every Tuesday at Casa Chappala at noon. There are several of Brad's students at both meetings.

I attended his R2R event, and ultimately decided to take the dive without his program. I do believe that if I had signed up for the program, that I would not have regretted that decision either.

Please detail out your monthly expenses, so we can double check that you have accounted for everything, and your assumptions are reasonable.