What % Do you Use for Repairs, Vacancy, Cap Ex, Mgnt Fees?

Starting Out
6yFollow

What % Do you Use for Repairs, Vacancy, Cap Ex, Mgnt Fees?

Jeffrey R. White
Member since 2019 · 20 posts · 10 votes

I am new to BP and signed up for BP Pro Subscription and am diving right in on property analysis.  My goal is a property by the end of October.

IN regards to the Rental Property Calculator I am wondering what are the typical numbers you use for:

Repairs, Vacancy, Cap Ex, Management  Fees

I have run 10 properties in 2 days and am going:

Repairs - 5%

Vacancy - 5%

Cap Ex - 5%

Management Fees- 8%

Are these numbers in the ball park?  Would you pad these a tad higher for a little more $ reserves?  I got these numbers by listening to various podcast.  I would love to hear your thoughts.

BTW I have found 1 property (4 plex) with a cash flow of $1190.00 and a CoC Return around 16%. Calling a realtor tomorrow!

Thank you!  Jeff

0Reply
28 views

Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Sam Stabler:

@Jay Hinrichs This is why you can never truly evaluate COC returns when others post their numbers. Its all so subjective and relative to that individual's calculations. Where one person may adjust 40% in operating expenses another will adjust 23%, so you get COC returns all over the place, even in the same geographic area of a subject property.

I find it somewhat humerous were the buy and hold crowd likes to say banking on appreciation is gambling and they are not gamblers.

Yet the same investor will run numbers that simply are not realistic and gamble that they can hit those numbers to justify their spread sheet and COC calcs.. When in reality NO one knows what they make until they sell.. if they don't roll up in 1031 s over and over.. those that come into the rental game buy a few doors then determine heck this is not worth it and have to exit.. unless they are in high priced and appreciating markets will generally take a capital loss when you figure you have to get the house ready to sell.. sales costs and recapture..

I know its been a shocker to me when i sold a few places off that I did not want to roll into something else..   its a LOOOONG game for sure.

Podcast Guest on Show #222
JLH Capital Partners51 Review
WebsiteView Page
3Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Scott Passman
    Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes
    6y

    Everybody runs their numbers a little different based on their own financial situation as well as the properties themselves.  "A/B" class properties will typically have fewer expenses than "C/D" class properties.  Older homes and home with deferred maintenance will need to be budgeted higher.  You can find typical vacancy rates for each town/city to help determine what type of vacancy rates to expect.  With no information on where you are investing, what types of properties etc, here is my general blanket response: you are way under budgeting.  

    I hear people talk about budgeting 5% for capex and repairs all the time too but from what I've experiences and seen from other investors I know annual expenses are much more than this.  For me, I generally use a baseline of 7-8% for repairs and 8-10% for cap ex and adjust depending on the property. Vacancy rates I would typically budget at 5-8% depending on the property and the area.  The other big thing to look at is management fees. While most managers will charge 8-10% of gross rents for this type of property, you also need to factor in that they typically charge 1/2 to full months rent to place a tenant and there are usually releasing fees.  If you think about it, losing a whole months rent is 8% of your annual gross income and that's on top of the monthly % they charge to manage it.   Many management companies tack on a lot of other fees too so be aware of any additional ways they may be padding their income. 

    Another thing to consider is that for multi-units it's likely you will need to pay for some type of lawn care/snow removal, if utilities/water aren't separately metered then you may need to include utilities in your monthly expenses etc.  I might take a look at some of those properties and revise your numbers to allow for more expenses and consider the additional costs of some of the other things I mentioned to see if they still pencil out as a good deal. 

    0Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    6y

    @Jeffrey R. White

    Those are in the ballpark. But don’t forget to evaluate

    Capex age and condition. 25 year old roof? 15 year old hvac? You better have more money in reserves or get seller to replace some things before close.

    0Reply
  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Jeffrey R. White What market are you in? The numbers likely vary by location and of course by property! 

    In OKC I factor..

    Repairs - 3-10% depending on property. 3% is new construction and 10% is rough. 

    Vacancy - 5% 

    Cap Ex - 5% - I don't plug this into my numbers. I keep 6-8k per per property in cash reserves. 

    Management Fees- 10% - you get what you pay for! 

    0Reply
  • Dennis Cosgrave
    Rental Property Investor · Member since 2019 · 304 posts · 462 votes
    6y

    Those calculations are a function of the market conditions in the area and the quality of the property you are looking to invest. Do the research for those statistics in your area and use them in your calculations. 

    0Reply
  • Kris L.
    San Antonio, TX · Member since 2019 · 930 posts · 836 votes
    6y

    @Jeffrey R. White

    Capex and repairs, 300/month for a 1500 sqft sfh. An old property costs more to maintain than a new property, even if the new property brings in more rent, so to me a % if rent doesn't make sense.

    PM, 12% (easy to forget tenant placement costs).

    Vacancy, 8%.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    that totals 23%  and while you might get there self managing I dont think you will get close to that if you have to have PM manage.. and as others said  location  ( snow rain)  desert makes a difference.. tenant quality ( nice tenant Vs tenant that is rough on house )  I think 40% for self manage gets you in the safe zone if you do better thats wonderful..  50% for fully managed if you do better thats wonderful.. but to cut your numbers razor thin then think U made a bad buy when cost run higher is more on the lines of gambling or wishful thinking.
    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    6y

    Percentages are wildly inaccurate unless they are built from experience in your own market. They are also horrible for very low rent markets. 5% for maintenance on $600 rent doesn’t cover much on a 75 year old building. 

    Speak to local owners.

    Vacancy- make sure you take economic vacancy into account.

    Consider adding turnover expense.

    Maintenance- comes from experience. Speak to owners that manage like you. Don’t speak to someone who self manage (if your not), Bc I bet he spends less.

    PM- find out what they charge in your market.

    Capex- this is building specific. See what the remaining life expectancy is on the big ticket items and build out a per month cost to this.

    1Reply
  • Sam Stabler
    Member since 2019 · 33 posts · 5 votes
    6y

    @Jay Hinrichs This is why you can never truly evaluate COC returns when others post their numbers. Its all so subjective and relative to that individual's calculations. Where one person may adjust 40% in operating expenses another will adjust 23%, so you get COC returns all over the place, even in the same geographic area of a subject property.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Sam Stabler:

    @Jay Hinrichs This is why you can never truly evaluate COC returns when others post their numbers. Its all so subjective and relative to that individual's calculations. Where one person may adjust 40% in operating expenses another will adjust 23%, so you get COC returns all over the place, even in the same geographic area of a subject property.

    I find it somewhat humerous were the buy and hold crowd likes to say banking on appreciation is gambling and they are not gamblers.

    Yet the same investor will run numbers that simply are not realistic and gamble that they can hit those numbers to justify their spread sheet and COC calcs.. When in reality NO one knows what they make until they sell.. if they don't roll up in 1031 s over and over.. those that come into the rental game buy a few doors then determine heck this is not worth it and have to exit.. unless they are in high priced and appreciating markets will generally take a capital loss when you figure you have to get the house ready to sell.. sales costs and recapture..

    I know its been a shocker to me when i sold a few places off that I did not want to roll into something else..   its a LOOOONG game for sure.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    3Reply
  • Account Closed
    Member since 2019 · 1k+ posts · 1k+ votes
    6y

    @Jeffrey R. White

    10%; 8.5%; 10%; 10-12%

    0Reply
  • Jeffrey R. White
    OP
    Member since 2019 · 20 posts · 10 votes
    6y

    Thank you for all the great insight and comments!   Great to hear experience being passed on!  Jeff

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free