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.

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 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.

Building my spreadsheet - what am I missing?

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