New to Real Estate · Littleton, CO · Member since 2021 · 19 posts · 16 votes
I am analyzing 10-30 unit apartment complexes in the metro Denver area. While the "rule of thumb" is to estimate expenses to be 50% of gross potential income, I have not come across an OM that had expenses higher than 40%. Most are in the 28% to 35% range.
Can anyone provide some ground truth as I am new and do not have previous experience to rely on.
@Tom McDermott Although 50% sounds high to me, the cost of remodeling is high in the metro area. Then, you have to take into consideration the age and condition of the building(s) you are considering purchasing. There are too many variables for me to give you a better answer. Maybe someone else can. If you are looking at a particular property, have an inspection done during your due diligence so you know what you are getting into.
Also, consider the fact that depending on whether you are buying in 2022 or 2023, you have the opportunity to leverage bonus depreciation of 100% or 80% respectively by getting a cost segregation study done. This can help offset income on the property if it is a passive investment. It could also be used on other gains on additional passive properties if they are aggregated. If it is active (you or your spouse are RE Professionals or the property is being used as a STR), you can offset additional income on other properties or W2 income.
Bonnie, all the info you shared is helpful. Keeping an eye out for the details without losing sight of the big picture is important. As I get a littler further very day, this will answered by experience that take into account all of the variable you listed.