INSIGHT REQUEST: How do you run your rough draft numbers?

[Anthony Bertolino]

Greetings Bigger Pockets members,

I am plunging myself into the Real Estate Investing world and trying to ingest as much high quality material as possible. In between listening to podcasts (and my first audiobook), reading my first actual book and reading forum/blog posts; I am practicing running numbers.

While the general 1% or 2% rule and 50% rule are an awesome rule of thumb, I want to hear more about your personal methods when budgeting for things like "Repairs and Maintenance", "Large Repairs", and everything else.

Now I know it's fairly straight forward to get things like Rental Property Insurance by contacting insurance companies and Real Estate Taxes by checking the books, is there any rules of thumb that can be used for those?

Currently I am running:

- Vacancy at 10% (I understand this fluctuates heavily by location)

- Property Management Fees at 8%

- Repairs and Maintenance at 12%

- Large Repairs at 5%

- Property Insurance based on Redfin Calculator

- Real Estate Taxes based on Redfin Calculator

* Rent is being pulled from Zillow

I am totally new and maybe it's a bit early to run numbers but I feel that it's good practice. I would love any input you may have!

Cheers,

Anthony

[Kristina Heimstaedt]

If you fix up the property right away, your repairs shouldn't be a major expense. We gut properties so our expenses are minimal as well as vacancy because most people like new. 10% is quite high for vacancy even from a commercial lender perspective. They're more likely to run 5-6%. I wouldn't use rents from Zillow. If you're looking at California where you can have severe fluctuations from crossing the street, it's not going to be accurate. I would call a local property management company instead. That is your best bet. Overall, the calculations I do are as follows:

(rent - mortgage - property management- property taxes) / (down payment + capital expenditures)

Using this formula, all of my properties run a 10-15% rate of return. We do have some on going maintenance, but it is typically from a tenant phone call as opposed to ongoing maintenance. 

Looks like you're hedging your bets though which is better than not doing that. Keep going!!!