Reasonable percents for repairs, vacancy, and cap-ex

[Hemang S.]

Hi BP community, this is my first post!

I am looking for a 4 unit multi-family and have identified some candidates. I want to know if using 7% (of gross rental income) for repairs, 7% for cap-ex, and 7% for vacancy is reasonable, or too high, or too low when running the numbers. I've talked to several small multi-family owners and none of them account for this much of an expense, but I've seen Brandon on BP videos do it all the time. In your experience, what are reasonable percentages to use (the property is a decent condition 100+ year old building)? If there any any strategies for figuring this out for a specific properties, I am all ears! Thanks!

[Taylor L.]

It really depends on the area and the property. A newer property is going to have lower cap ex than one that has been around for 50 years and has lots of deferred maintenance. I prefer to look at things in terms of dollars per unit per year as well, since rents can very highly between different markets, but the cost of a heat pump (for example) generally doesn't have quite the same degree of variability.