What are some realistic tenancy terms and maintenance costs (turnkey)?

[Rafael Ro]

Hello all,

I'm trying to analyze deals by plugging in the numbers into a spreadsheet, but I'm struggling to figure out what numbers to use for vacancy and maintenance?

Specifically, some of the deals I'm considering come from established turnkey companies (very reputable in these forums) that have been around for a long time and they claim very long tenancy terms. 

One of them is claiming an average of 3.8 years (they deal in C class neighborhoods), and the other one is claiming 6 years or more (B- class neighborhoods). They're saying that's "average". 

Furthermore, since these are turnkey companies and praise themselves on their renovations, the B class turnkey is using only 2% of rent (which averages around $1500/pm) for maintenance, and the C Class turnkey is using 7.5% of rent (avg about $1000/pm) in their calculations. They argue that the first few years maintenance would be insignificant since the properties are renovated, and so you're essentially stashing that money away for the future maintenance needs. 

Do these numbers sound at all realistic? 

Obviously every market is different, but what have you seen in your experience? Consider that a few big expenses (ie. roofs, HVACs, etc) are often taken care of for a little while, since they are replaced as part of the reno in a few of these example properties.

Thank you all in advance! 

[Sean Barnebey]

This is a great question, and it’s smart to dig deeper into the assumptions turnkey providers are using in their calculations. While the numbers they provide might make sense under specific conditions, it’s always a good idea to apply a more conservative approach to ensure you’re prepared for the unexpected.

For vacancy, the tenancy averages they’ve shared (3.8 years for C class and 6+ years for B- class) aren’t out of the realm of possibility, but I’d treat them with caution. Vacancy rates can be highly market-specific and influenced by factors like the local job market, tenant demographics, and property management. Even with long-term tenants, you’ll still have turnover costs when they leave. A safe baseline is 5%–10% for vacancy, with C class properties often leaning toward the higher end due to more transient tenant populations.

As for maintenance, the percentages they’re quoting—2% for B class and 7.5% for C class—are on the optimistic side, especially for long-term projections. It’s true that freshly renovated properties should have lower maintenance costs in the first few years, but this doesn’t account for unexpected expenses. A more typical rule of thumb is to budget 10%–15% of gross rental income for maintenance and repairs over the long term, depending on the property’s age, class, and location. For example, in C class neighborhoods, you might see higher tenant turnover and more wear and tear, which can increase costs over time.

It's also worth factoring in reserves for capital expenditures (CapEx), even if major items like roofs and HVAC systems are new. These big-ticket items will still need replacement eventually, and having a reserve fund helps avoid financial surprises. A good approach is to set aside an additional 5%–10% of gross rent for CapEx, depending on the property's condition and renovation quality.

While turnkey companies often provide attractive numbers, it’s important to remember their goal is to sell properties. Running your own, slightly more conservative pro forma ensures you’re financially prepared even if things don’t go perfectly. It’s always better to overestimate expenses and be pleasantly surprised than to underestimate and get caught off guard.

Hope this helps, and good luck with your analysis—sounds like you’re on the right track!