Multifamily Operating Costs

[John Johnson]

I am starting to budget out and model some potential projects for MF developments. Is there a rule of thumb for operating expenses for MF in the los angeles area? My old AM firm always looked at 30% of EGI - after vacancy of 5-10% (Stabilized). I am curious if there are other developers that have other methods or historical price points for % of gross sales new construction MF units will run.

Also we are building tiny units so this would account for more units vs traditional building size and square footage. I was looking at 20 units MF building collecting about 1000 a month per unit. Ultimately white paper wise:

$1,000 x 20 Units x 12 Mo's = $240,000 per annum

5% vacancy = ($12,000)

EGI = $228,000

OPEX @ 25% = ($57,000)

Operating Income = $171,000

Reserves @ 5% of OI = ($8,550)

NOI = $162,450

Would this be feasible or am I dreaming? I like to believe 50% Opex would be the most conservative way but then most projects wont pencil ...

Any input is appreciated, thanks.