MultiFamily Underwriting Rules of Thumb

[Blake Marks]

Hi everyone - I'm reposting this here from another forum because I didn't get any responses.  Hope this is the right place!

 I've recently relocated from Los Angeles to Boise, Idaho. I'm working on buying apartment buildings in the 15-20 unit range and trying to figure out some rules of thumb to gut-check the expenses I'm using in my underwriting. I used to work in commercial brokerage so you'd think I'd just *know* it, but... that was in LA and on much bigger projects!

Anyway, cost of living in my target region is right at the national average - not too cheap, not too expensive. I'm hoping you can help me with some rough per-door per-year numbers and any other rules of thumb you use. I generally bucket all my expenses into the following:

Payroll (Note: payroll made more sense on the institutional deals I used to work on. I don't think I'll really have a payroll expense on these smaller deals - but, if that's true, it really blows up a lot of the ratios I used to use 'cuz it can be a big expense.)

Marketing

G&A

Turnover

R&M

Contract Services

Utilities

Property Taxes

Property Management

Insurance

Capital Reserves

Specifically - I'm looking for per-door per-year numbers for the above, and total expense as a % of EGI (or gross) for these smaller (15-20 units) deals.  Also, this is really about forecasting prior to due diligence when under contract.  In general I would use historical data, of course, when available.  

Thanks in advance!

[Charlie Fitzgerald]

This might seem a bit simple, but why not ask the seller for their financials for the properties you are interested in and go off actuals rather than forecasted projections?  If you deem the actuals to be overstated or understated, then you can make corrective assumptions based on your gut and other derived market data you come up with.  I think you will get to some workable numbers for analyzing a potential acquisition quicker, than using broad number per door assumptions.  That's my $0.02 worth.