Single Family Maintence/Repair/CAPEX estimations

[Eugene Lee]

Hi All,

I'm looking at a few sfr properties in the midwest with cash flow potential and I'm having some trouble with the maintenance/repair/CAPEX numbers. Currently, I am budgeting the following:

Maintenance/Repair: 7% Gross Rent - 5%-7% seems to be standard for SFR properties?
CAPEX: 180/month (2160/yr) - because its slightly higher than the BP book recommendation

It may be important to note that these investments would be turnkey
 
Do these numbers make sense or are they too liberal? too conservative? I would really like your insight. Thank you!

EDIT: damn it I posted in the wrong forum ._. 

[Jeff Kehl]

@Eugene Lee It's really not possible to give you good percent or capex numbers like would commonly be done for multi-family because it varies so much depending on the SFR you're talking about.

On turnkey, if you have a reputable provider you should have no or low repairs or capex for the first couple years. After all they have just repaired and upgraded everything right? I was a bit skeptical of this when I bought a turnkey as a test but it has actually mostly turned out that way. I've owned it about 2 years and had very low repairs/capex the whole time.

But you could get a bad tenant even with a great Property manager and they could trash the house causing $5k in damage. Or you could get a horrible PM that charges you $500/month in repairs just because.

My point is, you can estimate whatever you want, your numbers look fine. But there are more important things like A) vetting your turnkey provider B) vetting your Property manager C) Making sure the property is good with a great inspector D) Picking a good market where if you experience a nightmare tenant it won't matter because the property will appreciate in value and E) Making sure you have adequate reserves to absorb the 'learning experiences' that will inevitably occur.

Also, a lot will depend on the demand for rentals in the market you choose and the type of property. Because, if you buy an SFR in a good school district in a very tight rental market like Denver, Dallas, Atlanta you may not get a maintenance call or a tenant turn for 5 years. Most of your repair and capex will come when you do a tenant turn.

In addition to market, there's a difference between higher-end and lower-end. Are you buying a Turn-key that is brand new in San Antonio for $150k or a rehabbed 80 year old house in Cleveland?

Once you've bought 10 SFR you can kind of rely on percentages like that. Before that it comes down to hard work, good partners and luck in that order.