Estimating Repair Costs and CapEx

[Shiv Gettu]

Hi everyone!

I'm a new investor and wanted to get a better understanding of how to accurately assess costs. I've been using the BiggerPockets calculators to run numbers, but my one concern is: how do you vett the accuracy of your numbers? 

For instance, how would I get an accurate estimation on CapEx fees if I am just looking at the listing online, and how do you precisely differentiate between different CapEx fees? Or the Repairs and Maintenance costs of each house? I know it probably varies based on the parameter "Age of property", but it still seems very subjective and difficult to get accurate estimations on some of your numbers.

What do folks do to ensure accurate estimations regarding CapEx, Repairs and Maintenance, Vacancy rates, and ARV?

Thanks a ton in advance :) 

[Matt Schelberg]

Hi @Shiv Gettu I agree that it is often very subjective to estimate capex and maintenance.  

Determining capex requires identifying how much a replacement costs and how long it will last. For example a water heater can be estimated to cost $800 and last 8 years.  So the annual capex cost for just the water heater might be $100/year.  You repeat this exercise for all the major systems in the house.  A good article on the subject by Brandon Turner is here.

Maintenance:  This is probably the toughest one to estimate because it has the most variables.  Age, local costs, and the quality of your contractor network (are you using an expensive national plumbing chain or a licensed plumber who works out of his house and has little overhead?).  Ask a local property manager what a realistic average annual maintenance cost is for your type of house.

Vacancy rates:  Ask a local property manager what vacancy rate to expect.  One variable to consider is the rent relative to market rates.  A below-market rent will have lower vacancy.