How much to account for Vacancy, Repairs and CapEx?

[Luis Baumeier]

I bought my first deal and I am looking for my second one. I love analyzing deals every day and created my own spreadsheet to do it. On it I account for a monthly value of 5% of the rent for Vacancy, 5% for Repairs and 5% for CapEx. My Market is South Richmond-VA. Do those numbers sound realistic? How do I get accurate numbers?

Thank you

[Ryan Murdock]

It really depends on the condition of the property. On a brand new building 5% CapEx is probably fine. If you're any more than 0% through the useful life of any of the major systems (heating, roof, etc) you may need to adjust that number accordingly.

Same for Vacancy and Repairs. Is the building full of quality paying tenants? Or are you going to have to throw everyone out in the first year and endure heavy turnover costs in each unit?

Once stabilized the 5%/5%/5% thing usually works but it can often be very expensive getting it there.