Full Breakdown: Operating Expenses
People often ask me how they should determine their operating expenses.
These numbers should be determined using a combination of the historical financial data available, feedback from your property management company, your business plan, and the property characteristics.
Generally, you can expect per unit numbers like this:
Repairs & Maintenance: $200 – $500 per unit
Administrative: $150 – $350 per unit
Unit Turnover: $200 – $300 per unit
Contract Services: $200 – $500 per unit
Utilities: $800 – $1,200 per unit
Advertising $100 – $300 per unit
Payroll $1,000 – $1,600 per unit (very market specific)
Insurance: (very market specific)
RE Taxes: (very county specific)
Again, these are very general per unit numbers but they should help provide you with guidance.
Typically, your stabilized operating expense ratio (Total Operating Expenses / Effective Gross Income) should be between 35% and 50%. So if a property had $1,000,000 in effective gross income, I would expect the operating expenses to be around $450,000 (45% of income).
What expense ratios are typical in the markets you are buying in?