CapEx Accrual when Analyzing a Deal

[Peter Aziz]

Good morning BP Family! I hope everybody has had an amazing week and is looking forward to an even better weekend! I'm still on the hunt for a new acquisition and am looking for SFRs or multi units in the Indy area (but am open to other Midwest geographies). As I hone in on my numbers, I'm trying to figure out what I should be accruing for my fixed expenses (read, CapEx and Maintenance accruals). Here's what I'm coming up with so far for CapEx, irrespective of property type/class:

• Roof - 1,000 sq ft; replacement cost per sq. ft. $7 ($7,000 total); Useful life 20 years (240 months) = monthly roof CapEx accrual ($7000/240) = (a) $29.17
• Water Heater - replacement cost of $1,000; Useful life 10 years (120 months) = monthly water heater CapEx accrual ($1000/120) = (b) $8.33
• Kitchen Appliances - replacement cost of $1,000; Useful life 10 years (120 months) = monthly kitchen appliances CapEx accrual ($1000/120) = (c) $8.33
• Driveway/Parking Lot - replacement cost $5,000; Useful life 50 years (600 months) = monthly driveway/parking lot CapEx ($5,000/600) = (d) $8.33
• HVAC - replacement cost $3,000; Useful life 10 years (120 months) = monthly HVAC CapEx ($3000/120) = (e) $25
• Flooring - replacement cost $2,000; Useful life 5 years (60 months) = monthly flooring CapEx ($2,000/60) = (f) $33.33
• Plumbing - replacement cost $3,000; useful life 30 years (360 months) = monthly plumbing CapEx ($3,000/360) = (g) $8.33
• Windows - replacement cost $5,000; useful life 30 years (360 months) = monthly windows CapEx ($5,000/360) = (h) $13.89
• Paint - replacement cost $2,500; useful life 5 years (60 months) = monthly paint CapEx ($2,500/60) = (i) $41.67
• Cabinets/Counters - replacement cost $3,000; useful life 20 years (240 months) = monthly cabinets/counters CapEx ($3,000/240) = (j) $12.50
• Structure (foundation/framing) - replacement cost $10,000; useful life 50 years (600 months) = monthly structure CapEx ($10,000/600) = (k) $16.67
• Components (garage door, etc) - replacement cost $1,000; useful life 10 years (120 months) = monthly component CapEx ($1,000/120) = (l) $8.33
• Landscaping - replacement cost $1,000useful life 10 years (120 months) = monthly landscaping CapEx ($1,000/120) = (m) $8.33

Sum of (a) through (m) = apx $214/mo for my CapEx accrual - Does my approach make sense and does it seem reasonable?

Aside from CapEx, I'm also trying to determine my monthly maintenance expense. I'm coming up with a monthly gardener expense of $30 and a (TBD) expense for snow removal. Since my entire current rental portfolio is in SoCal, I don't have any experience with snow removal (or the expenses associated with it). Do you Indy/MidWest landlords budget for snow removal expense?

For PM, I'm budgeting 12.5% of gross collected rents (10% standard fee for gross collected rents plus another 2.5% ancillary expense for turnover/lease prep/inspection fees, etc).

For vacancy I'm conservatively budgeting 10%

Based on the above assumptions, I'm modeling out potential investments. For whatever it's worth, I'm primarily looking in B+ to B- areas, which may result in favorable occupancy relative to my 10% vacancy factor. Can anybody opine on my assumptions relative to their actual real world experience - I'm primarily at a standstill when it comes to my CapEx accruals. Are my assumptions reasonable?

I really appreciate the help. I hate asking for help without providing some sort of value in return, so I'm happy to share my excel model that I'm using to analyze properties in exchange if any of you find that useful. Again, thanks for taking the time!