1959: Year Built - What to Estimate for Maintenance

[Dylan Barnard]

Good afternoon BP. My girlfriend and I came across a duplex built in 1959 to rent and we were wondering what investors typically set aside for future maintenance and capex on properties that are almost 60 years old. Are there any rules of thumb out there? I know it depends on the condition of the property and all of that, but the property appears to be in good condition and only in need of minor repairs initially. 

Running the BP calculators, we decided to put a total of 15% of rents aside (5% for vacancy, 5% for general maintenance, and 5% for capex) and it still came out to a 15% COCR with 25% down on a 5.5% 30 year mortgage after we put about $10k worth of work into one side of the property. So, my main question is whether or not we are overshooting or undershooting with our 15% budget or should we allocate more since it was build in the 1950s.

This would be our first purchase of real estate and we are cautiously excited and are just looking for a little commentary. Thanks.

Dylan

[John Leavelle]

Howdy @Dylan Barnard

There can be all kinds of hidden issues with an older property. Building codes have changed since 1959. How do you know if the appropriate upgrades and remediation have been accomplished. Lead paint, asbestos, wiring all could still be in the property. An inspection is the only way to really know. Until then I would maintain 10% each for Maintenance and CapEx. Once you have the inspection and everything is clear you can adjust accordingly.