Milwaukee Duplex: Are my assumptions for expenses ok

[JJ Espinoza]

I am using some rough estimates for expense for Milwaukee. This would be my first investment in Milwaukee and I want to see if my expense assumptions are close.

Can someone with experience in Milwaukee point me in the right direction, some of the things I'm wondering are:

• Are the utilites expenses in about right?
• Do tenants or owners typically pay for utilities?

[Marcus Auerbach]

I agree with Brock on utilities, you can scratch electcity (and gas) - but make sure that you consider lawn and snow (or have the tenants do it).

The difficult part is usually capex, this is where I see most mistakes made and if you have not had the experience it is easy to underestimate. You have $5,000 for initial repairs and $180 a month for capex. I have not seen the interior, but I would not be surprised if you have to add a zero to the initial repairs - be sure to check that out! 

A distressed duplex will often require $20k to 30k per unit for a full rehab (plumbing, electric, kitchens, bathrooms, floording, doors, trim, drywall/plaster, paint, HAVC, water heater, new kitchen appliances etc etc - it adds up quickly), plus exterior (check roof, siding, windows, garage, driveway, fence, trees, landscaping..) which can easily be another 20-30k. Most agents lack the knowledge of estimating repair costs, you may need a contractors help for that.

(And read J.Scott's book on Estimating Rehab costs, you can order here on BP).

You may need less than that, depening on the actual condition of this particual property - but be sure to know what you need to get the units up to your desired standard, whatever that is. Note that this standard will dictate the standard of tenants you will have (nice place = nice tenants, trashy place = trashy tenants).

You may also be able to defer some of that into the future, and use your monthly capex to pay for it - you have budgeted $180 per month, $2160 per year. So if your roof is getting to the end of it's life, you may be able to do that in 3-4 years and use the accumulated capex reserve to pay for that. But again, make sure that is the only item you need to budget for in the next 5 years.