Expense Forecasting... Lessons learned from the field

[Richard Cole]

Hello everyone, 

After some hefty pest control expenses from several building that we manage, we realized that pest control was not a line item we had when running our annual expense projections on a building. However, it is significantly impacting cash flow for some of our clients. 

We're in MA and have noticed a range of $680-950+/year for pest control in multifamily buildings in the area. Heads up to any investors running numbers and wondering what could come up in that "misc" expense category. Pest control is one of them. Going forward, we'll be adding this to our expense projections as its own line. 

What have other rental property investors noticed as unexpected expenses that you weren't aware of before investing/managing property? 

Thanks to all.

[Kevin Dean]

@Richard Cole

One issue that you can run into pretty easily is accurately forecasting payroll. T-12 payroll numbers are almost useless if you are picking up a stable asset and executing a value add strategy. It's helpful to work with your Property Management Company in order to break down the exact amount of staff needed to service your property through the various stages of a value add strategy, to assign the appropriate estimated hours worked for each of those employees and lastly the estimated dollar per hour wage that each of those employees will receive throughout the hold period.

It's so easy to just take an average number for your market, such as $1,200 per door in Market X, but not actually figure out what makes up that $1,200 per door on an ongoing basis as it relates to your specific market and the specific type of project that you will be executing.