Multi family/running numbers

[Diante Lawrence]

How do you run numbers on multi family properties? I know how to do everything with a single family home, but i am not sure if the same rules apply to multi family.

[Travis Lloyd]

@Tony Hardy is very right - the numbers in OMs are always fabricated, and frequently have whole categories just missing (marketing marketing marketing - right?)! The numbers will vary and may be more or less applicable depending on the size of the complex, but you should have something accounted for everything on this list:

Vacancy / Bad Debt

Concessions - will you have to discount rent to get new tenants? 

Taxes

Insurance - the bigger the complex, the more types of insurance you may need

Management

Repairs & Maintenance

Salaries & Benefits (don't forget free housing for key people in larger complexes)

Heating - oil, gas, whatever

Electric

Water - Assume high for larger buildings, unless you will replace 100% of plumbing day one. Have a property that started with $12k monthly water bill (plus another $6k monthly sewer) until we fixed all of the plumbing. Damn leaky toilets.

Sewer - See above

Garbage

Landscape / Snow - this too adds up for larger properties

Security - do NOT make the mistake of thinking that small properties do not need security. When one of your tenants claims theft/mugging/slip & fall/ANYTHING - have the security camera system to protect yourself. These can be leased for a lot less than purchasing. Larger complexes will also need physical security (nights & weekends maybe?) at least at the outset. It helps to have your camera system first - because too many security companies say they were there all night but they're NOT.

Then you have the management reserve (I've also heard it called maintenance reserve, but it isn't saving the maintenance team's *** - it's saving yours). Book 10% off the TOP for this or $100k, whichever is lower. Management reserve is below the line (not part of the NOI calculation), but a very important number in your analyzer nonetheless.

If you have a property that you're looking at, send me the details and I can work up a quick excel sheet with some variables for you.