Some of the expenses you can estimate quite accurately. What comes to mind are debt service, taxes, insurance and management fees. These are easy because you can get quotes or look them up. For taxes you need to be a bit careful since you may get reassessed after purchase.
The expense with the greatest uncertainty is repair and maintenance. My experience is that buildings with few units, maintenance is a lower percentage of the gross revenue. I use 11% for duplexes, however, this can have a wide range. Looking at actual expense records or schedule E is a good idea.
Another expense that will depend on location is vacancy factor. I use 7% in most of the areas where I purchase. My preference is to have tenants pay their own utilities, but occasionally I may pay. In some cases, this cost is passed on to the tenant. If you pay, you might want to look at records.
Super answer, of course if you have the details from the former owner (especially schedule e) the answer is there already. Any ideas about an estimate (%) for 3 or 4 units?[ Edited by personalvoice on Date 11/16/2005 ]
Some of the expenses you can estimate quite accurately. What comes to mind are debt service, taxes, insurance and management fees. These are easy because you can get quotes or look them up. For taxes you need to be a bit careful since you may get reassessed after purchase.
The expense with the greatest uncertainty is repair and maintenance. My experience is that buildings with few units, maintenance is a lower percentage of the gross revenue. I use 11% for duplexes, however, this can have a wide range. Looking at actual expense records or schedule E is a good idea.
Another expense that will depend on location is vacancy factor. I use 7% in most of the areas where I purchase. My preference is to have tenants pay their own utilities, but occasionally I may pay. In some cases, this cost is passed on to the tenant. If you pay, you might want to look at records.
I hope that this is of some help.
Regards,
Ed
Super answer, of course if you have the details from the former owner (especially schedule e) the answer is there already. Any ideas about an estimate (%) for 3 or 4 units?[ Edited by personalvoice on Date 11/16/2005 ]
edmeyer,
Do you also factor in a separate marketing cost for filling your vacancies? Or, do you include that in the management fee?
Just curious.
edmeyer
Thank you for the response. I appreciate it.