Average percentage used on operating expenses when evaluating

[Denise Sieg]

Hello everyone

I would like to get a sense of what percentage (5-10%) you allow for maintenance cost, cap ex & vacancy when analyzing a property I realize it's based on property condition and other factors but let's say for a SFH in updated condition. I was considering vacancy 10%, cap ex 5% and maintenance 5%.

What do you think?

Any advice is welcome

[Tim Herman]

@Denise Sieg 10% vacancy means you will have a turnover every 10 months. As a conservative investor I use 8% or 1 turnover per year. Maintenance is based on how many service calls per year you have plus the cost to rehab the unit on turnover, the larger it is the more it costs you . I average 1 service call per year. Repair a leaky toilet. Burned out oven coil, etc. I use 5% for repairs. Capex can be estimated fairly accurately by using a capex spreadsheet. An example. Floors. Look at the commercial warranty of flooring Almost all is 10 years so that is the lifespan I use. Assume 1000 sf of flooring. My area it is $6 sf to replace. $6000/10 year life span/12 months = $50 per month for 1 item in a capex budget. Still have to budget for roof, hvac, appliances, hot water heater, bathroom and kitchen remodels, etc.