Maintenance and capital expenditures: MF

[Account Closed]

I am very excited (and very anxious) about getting close to purchasing a MF property. I am analyzing a half dozen MF properties (15-60 units) and going over some spreadsheet analyses. I have gone through BP forums for a few hours trying to find some definite answer to the question I have, with little consensus.

My question: When estimating expenses on class C/C+ multifamily, what proportion of rent (or cost per unit) do you suggest using for maintenance and capex?

I am looking at properties close to turnkey. So, assume the property is all fixed up. Let's say it was built in '72, is in good shape and tenants are pretty reasonable blue collar folks.

For capex: I understand that when doing an inspection it is best to look at all major systems (appliances, boiler, roof, etc) and figure out the remaining life and save accordingly. But in the initial analysis before an inspection would a reasonable estimate be about 5%?

And, for maintenance (not capex), how much do you estimate? This would be for daily repairs (fixing a pipe, painting between tenants, broken lock, cracked window, electrical short, etc, etc). This should be for parts and labor. I know this is dependent on many factors, but what do you believe is the ballpark range?

Thank you,

Jeffrey Kovnick

[Giovanni Isaksen]

Just to add to @Jeff Greenberg's comment on capex, don't rely on a lender's replacement reserve requirement to figure how much to budget. Banks often require $250/unit but in the Seattle area for instance, properties are actually spending $450 on average according to market research.

When we build a proforma for a property we're interested in we add capex based on our estimate of everything we can see (I love Google Earth and Bing) like roof, windows, landscaping, parking lot and ballpark for everything we can't like central heat. Everything wears out and we've found if you don't include a line item in your capex for something, down the road it will be an expensive surprise.