Running numbers for rental property

[Mitchell McLean]

Hey BiggerPockets community

I am currently looking for my first investment property in Marietta, GA. With all the uncertainty going on and this being my first deal, I wanted to make sure the numbers made since. I am looking for any advice or input on running numbers and if I might be over looking something.

Income- I mostly consider average rent for the size of the property I am looking at. I usually find these numbers on rentometer or the average rent for the area on Zillow.

Expenses-

Taxes- the most recent tax information included on the MLS

Insurance- I usually just say $100/month

Utilities/ Lawn maintenance- I would prefer to structure the lease where this is the renters responsibility.

HOA- whatever is listed on MLS

Vacancy- I consider 5% of monthly rent

Management- 10% of monthly rent

CapEx/ Repairs- I normally round to $200

Mortgage- the monthly payment for whatever I am offering and the interest rate my lender has me approved at.

If this seems correct, awesome. If anyone thinks I’m overlooking anything or could find more accurate answers please let me know. Once again any advice is appreciated! Thanks I’m advance

[Lynnette E.]

Originally posted by @Mitchell McLean:

@Lynnette E. Thanks for the advice. I would hope to have savings/ emergency fund set aside if something broke at the beginning. Overtime do you think $200/ month would suffice or still adjust for more?

I am anal. I have a CAPEX price developed for each property. I go over the major systems and develop the CAP EX. I'll give you an example:

roof 10 years old, for a 30 year roof life.  20 years of use left --240 months, cost to replace $10,000, cost per month 10,000/240 = $42

kitchen new, life 15 years --180 months, cost to refurbish $15,000, CAPEX cost per month 15,000/180 = $83

HVAC system, 12 years old, useful life 15 years, life left 3 years --36 months, price to replace $8400, CAPEX cost per month $8400/36 = $233.

I would go on and do this for bathroom refurbishes, outside paint/siding/soffits, windows, most appliances, any expenses for that house that have a life from new of more than 5 years.

Then add them up for your monthly CAPEX amount $42 + $83 + $233+ ….

Personally if something lasts less than 5 years or is not (by me) replaced or refurbished unless broken I call it repairs/maintenance, not CAPEX. I do wiring, plumbing, interior painting and flooring as maintenance as I do not redo all of those things at once unless the house is new.

So you can see from just what I penciled out that if the systems are newer or last a long time they have a lower CAPEX cost per month. If you have a lot of systems that are at then end of their life your CAPEX costs will be a lot higher.

You really can not ball park the CAPEX and get a general cost for all properties. Older broken down worn houses have a high CAPEX cost, newer ones that were well kept or any that were recently refurbished will have a lower CAPEX cost.

If you started with all new systems, no major extras like a pool, then you likely could have a CAPEX of $200 / month. But that is not what we buy...

Lets just add up what I have above for the 3 systems I put number to, but assume the house is brand new and everything has its whole life left:

roof: 30 years =360 months, $10,000 cos: =$28/month CAPEX

Kitchen: same $83

HAVC: 15 year =180 months, $8400 cost: $47/month CAPEX

You can see that the CAPEX is much lower now for the systems I analyzed.