Variable Landlord- Paid Expense Percentages

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
3yFollow

Variable Landlord- Paid Expense Percentages

Casey Adams
Member since 2023 · 23 posts · 14 votes

Hello Everyone!

I've seen previous posts that are a few years old when searching and just wanted to clarify what I should be plugging into these percentages. I've seen David Greene plug 5/5/5/8...but that seems pretty light for potential expenses. I've played with 10/10/10/10 and that has essentially killed any deal I've found no matter how good ARV is with current rates. However, if I'm not utilizing those percentages (5/5/5/8) it's getting really difficult to find little if any (mostly negative) cash flow on potential deals.

I know the high rates are making it rough and you want to marry the property and not the rate, but if I could get some advice on what fellow BRRRRers are using for their numbers I would appreciate it, if not for anything for a reality check for what I should expect.

I recently got approved for my HELOC and I'm about to take the dive so I'm trying to be as conservative as possible so when I find the right deal I can snatch it up.

Thank you everyone for your help and insight on this!

Casey

0Reply
20 views

3 Replies

Jump to latestLatest
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y

    @Casey Adams, I think most people use 5% each for capital expenses, maintenance, and vacancy. So, the 5/5/5 you mentioned is right on point. I don't think that is light at all in fact I think that you can in real life do better than those numbers.

    However, the assumption is that you are starting with a property in very good condition. If the property has deferred maintenance you should budget to bring it up to par with a light rehab as part of your purchase.

    Now, the 8% number you cite for property management I think is on the low side. I know there are property managers who work for that but I doubt you will find less and are likely to find ones that charge more. I would budget 10% for property management believing that I can find someone suitable at that price or slightly lower.

    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    Actually, it should depend on the property Class you invest in.

    The numbers you reference are for Class A rentals. 

    The numbers should be higher for Class B, then even higher for Class C.

    Logical Property Management4.9464 Reviews
    WebsiteView Page
    2Reply
  • Casey Adams
    OP
    Member since 2023 · 23 posts · 14 votes
    3y
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free