Discussion; Expense percentage for Commercial Properties

[Brent Kiger]

Hi all, I have a question that I'd love to get some experienced investors to weigh in on. I am curious if there is a generally recognized percentage to expect for expenses when it comes to multi-family apartment buildings say between 25 - 75 units? I realize there are a ton of variables here, but I have a single family, duplex/fourplex portfolio and have always used 40% of rents are going to be eaten up by all expenses, including tax and insurance, and the rest is to pay the mortgage and keep. That has proven more or less true in in my business. I know Clayton Morris on his podcast and others here on BP use a similar, albeit very ballpark number.

However, I am looking to get into commercial real estate, and hope to purchase a 25-50 unit next, and when scanning buildings for sale, I'd love to be able to have a similar number. Again I realize there are a ton of variables depending on the property, how many buildings, etc... I'm not looking to get too much into the weeds here. Just trying to see if a similar number exists in the commercial arena. I'd like to think it would be a smaller percent for expenses due to economies of scale, but also realize there will be bigger and more expensive things breaking...

I'd be curious to see what experienced investors average expense vs rent is. 

Any help would be greatly appreciated.

Brent

[Bruce Petersen]

Generally you will be around 48-52% for properties without all bills paid and 60-65% for ABP.