Calculating SFH rental monthly expenses

[Kam Ajani]

Hey everyone! 

I'm a new real estate investor looking in and around the Atlanta GA market for SFH rental unit. This will be my first time buying a house, and I'm currently in the process of analyzing deals. I have had a difficult time coming across ANY deals that don't have a negative cash flow, and I want to double check if I am running my numbers correctly (mainly my monthly/operating expenses.)

First - Should I be calculating for utility costs into my analysis, or  should i plan for these costs to be passed on to the tenant, or a mixture of both? I''m not sure what the industry standard practice for this would be. If its a mix between landlord and tenant payment, who would pay for each of the individual utility costs (between water, electric, gas, garbage, lawn and sewer) If all of these are to be paid for by the landlord, approx. how much should i calculate for each of these costs? I am looking around Atlanta GA, approx. 3 bedrooms with a purchase price of around $300k 

Also, I am accounting for about 7% of monthly rent to be set aside for monthly CapEx, does that sound about right?

Thanks!

[Brenden Mitchum]

Hey @Kam Ajani

Just responded to your other post on the Atlanta market but wanted to also provide a little advice on analyzing deals.

Utilities and who pays will depend on your strategy. If you're just renting a SFH to a single family, typically they would put the utilities in their name and pay for them. Garbage may be something that you already pay through property taxes so make sure you check that. Lawn care is not considered a utility and most folks write leases that put the responsibility for lawn care on the tenant. However, this is up to you.

7% for CapEx is fine. Really that just depends on the age of the home and its systems after you purchase and/or renovate. If the home/systems are brand new, you could get away with 5%. If everything is really old and you replaced nothing before putting a tenant in, 10%+ is smart. Typically you'll be in that 5-10% range. Make sure you're also including another 5-10% for repairs/maintenance. Don't forget another 8-10% for vacancy and another 10% for property management.

Hope that all helps clarify your calculations a bit! Again, please feel free to reach out anytime if you have other questions or just want to chat!