Building my spreadsheet - what am I missing?

Question

I'm in the Portland, Maine area and trying to build out my spreadsheet for running numbers on buy and hold multi families (4 units or less). I looked around BP a little, found @Brandon Turner's investment calculator and used that as a jumping off point for running the numbers to see if a deal cash flows or not. I think I have just about everything captured, but being new at this I'm not sure and am looking for some feedback.

For expenses, I have the following broken down by month:

Insurance
Mortgage
Accountant fees (for taxes)
Cap ex (5% of monthly rents)
Electricity (tenants mostly pay, but if there's a vacancy I pay during that time - I've budgeted $240 a unit per year, being really conservative)
Specific fees to the town I'm looking in (storm water, unit registration, etc.)
Landscaping
Legal (trying to go with the "family office" that reviews leases, management agreements, etc. to make sure everything is up-to-date)
Maintenance (electrical and plumbing - have this as 3% of gross monthly rents)
Management fee (10%)
Propane/heating oil (tenant pays primarily, but if there's a vacancy in the winter...)
Property tax
Snow removal/shoveling
Vacancy rate (5%)
Water

I'd really appreciate thoughts on what I may be missing and whether I'm not budgeting enough for expenses like maintenance or cap ex. Thanks in advance!

Tammy Richards · Answer

@Andrew Magoun, -take these thoughts with a grain of salt, I've only owned two multi units so far:You may also want to increase your maintenance/repair percentage, depending on the age/condition of the property you purchase. I see you are limiting it to plumbing/electrical - even if you do your own repairs, an older building, or a poorly maintained building may increase that. I use 10% of the gross monthly rent (but it is an older building) And 5% for CapEx - that's one number I don't use a percentage for. I have been influenced by @Ben Leybovich on this:https://www.biggerpockets.com/renewsblog/2015/03/0...I use $250 per month. If you use 5% for a building that pulls income of $20,000 per year, that could be too low - only $1000 per year in that case. I use $250 per month minimum, which is 30,000 over ten years, because I know that one blown heating unit, a foundation leak, a new roof, or new egress windows to meet code will eat up the CapEx even for a small multi-unit.It's great you are running numbers. Run run run them, analyze a boatload of properties. By doing this over a few months, I got much faster at saying "nope" to a lot of properties... it helped me narrow my criteria considerably.

Lane Kawaoka · Answer

If you want to go as far as breaking out vacancy from rent up fees. When you have turn over 50% of rents usually go to PM.

Heather Longfellow · Answer

Hi Garbage container can run $80-$110 per month depends on size also you need to have insurance money for new property paid in full for first year on closing.........the bigger pockets calculator is excellent.I paid $1000 for the same info from a well known guru a few years ago.Good work best of luck. Heather

Tammy Richards · Answer

I think that depends on how many/large your units are, and what your risk is (lower income tenants = higher risk). I did not account for this expense prior to purchasing my 4 unit. Thankfully I purchased a good cash flowing building, and I did budget for higher than usual maintenance/repair costs as the building was in such poor repair when I purchased it. I also way over-budgeted heating costs - so this year that saved my butt . In future years I will likely budget $2000 per year for pest control- which is on the low end for a 4 unit with 3 BRs each, low income - but am hoping it will be somewhat accurate because I invested heavily in equipment that allow me to take a certain amount of the pest control issue into my own hands. I will also be screening future tenants - not inheriting them - so again hope to have more control. But it's going to be different for you.

Tammy Richards · Answer

Pest control. Portland, and cities around Portland (Biddeford especially) have bed bug issues, especially low income units. Maine state law requires landlords to use licensed exterminators to treat when a tenant complains of bed bugs. A licensed exterminator charges at least $500 per unit for treating a 3 bedroom unit (for one treatment and follow up 3 weeks later), or more (some charge $750 per 3 bedroom unit with 1 initial and 2 follow-up chemical treatments). And these are not guaranteed treatments... Before purchasing, hire a licensed exterminator to inspect, and afterwards, even with higher income tenants, know that this is a possibility.

Andrew Magoun · Answer

Tammy Richards , thanks for sharing that article. I'll have to go back and add some better CapEx numbers into the spreadsheet. The only issue now is finding good estimates for how much it costs to replace some things (like the roof or the cost of painting the house again). I guess there's always something!

Brent Wooster · Answer

Andrew, Tammy, Newbie here and it is nice to hear about transactions here in Maine. Would like to meet with some folks fairly soon to learn and offer my help/services to learn and grow together. Willing to work and learn!!! Brent

Andrew Magoun · Answer

@Tammy Richards, thanks for pointing that out. How have you accounted for that in your numbers? Do you just assume a certain percentage per unit per year, kinda like cap ex? If so, what numbers are you using?I want to have my numbers run on the conservative side so even if things don't go the best I'll know I can still cash flow. On the other hand, I don't want to throw so much in there or have the percentages be so high that nothing seems like a good deal, even when it actually is.