DUPLEX MONTHLY EXPENSES

[Nicholas Zornek]

Creating a savings plan and budget for the purchase of a duplex, from my understanding the following expenses typically include what I have below,what else am I missing ? Not including initial financing ,and rehab cost. PITI UTILITIES CAPITAL EXPENDITURES Landscaping/Maintence

[Joe P.]

I am using far more conservative numbers for my property; I am self managing but usually do 10% for management, 10% for CAPEX, 8% for maintenance, 8% for vacancy; these are percentages of the gross monthly rent (for this property, its $1900 rent income per month). If your property makes only $500 rent per month, chances are you need to raise your CAPEX/maintenance/vacancy budgets. A $2000 roof could be installed in a $500 per month property, or a $2000 per month property, for example. Just because you don't make as rent doesn't mean the costs are not comparable. A water heater cost and labor will be $800 in both units...list goes on and on.

Also, make sure you eval the property's current CAPEX state. I see I made a major deficiency in purchasing my current property with the age of the key items, e.g. gas furnaces, water heaters, washer/dryers, refrigerators, stoves, plumbing, electrical, etc. You need to try and guess the age or get the age and make conservative assumptions as to their replacement, or assume you need replacements right away and account for it in the purchase.

I'm two months into my purchase and both my maintenance and CAPEX budgets have 10% remaining for the rest of the year. Most likely my even conservative estimates were not conservative enough. You may want to consider a slider where you have to account for a high count of CAPEX/maintenance in YR1 to handle a majority of the issues, or go back to your seller and say the age of X is Y, and needs to be replaced, and it'll cost Z, so you'll take $ off to pay for it.

Other costs to bear - township/city costs (licenses, inspections, COs, registrations, etc.), common electric, water/sewer, garbage fees, tolls/gas/mileage, your time, HOA, etc. If these seem like overkill, just wait until your saddled with a $150 registration renewal you weren't aware of, and see what those types of things do to your cash flow. I'd rather know where every dollar will end up beforehand than guess and be surprised down the line.