Due Dilligence - Forecasting Expenses

[Rodney Smith]

Hello BP, I am looking to 1031 a few properties that I currently own in Redding, CA and roll them into a larger investment with better cash flows. In short I have sort of house hacked a 4 plex and an SFR and would like to now sell and collect my appreciation to put down on a larger multi-unit apartment complex or Mobile home park. I'm looking to purchase in the $900,000 or less price range and i'm looking for 30+ unit apartments as well as a few mobile home parks and RV parks that seem to be in the 50+ sites range.

My question is this - I've been putting together my #'s to forecast income and expenses, but I'm not sure what kind of expenses to accurately project my management costs (assuming I'm not living in proximity to property and not managing myself), as well as estimating a monthly maintenance costs. I thought about allocating $75/unit in monthly repair costs which at first seemed a little high to me but may avg. out to be a good #?

Any feedback here would be appreciated (as well as pointing out other costs that I might not forsee). Right now i'm accounting for debt service, Taxes, and Insurance (although i'd be curious to hear more educated opinions of what a reasonable insurance est. would be on a 30+ unit complex). I still need to come up with decent estimates for grounds maint. , paid staff / mgmt. , monthly / annual repair budget. ??

Thanks in advance!

[Andrew Kniffin]

Hi Rodney, I'm doing something similar so happy to share notes. 

Here are my major expense lines:

1. Advertising
2. Auto/travel
3. Cleaning and Maintenance
4. Insurance
5. Management
6. Repairs (minor)
7. Supplies
8. Taxes
9. Utilities
10. Depreciation (this is noncash but goes into Sch E)
11. Sanitation
12. Water/Sewer
13. Capital Reserves (depending on quality of building, I put this at +/- $1,000 per year per unit

As a gut-check, these expenses should be ~50-60% of revenues.  I do not have a MF yet, but this is how I'm modelling the numbers. 

Hope that helps!