How To PreScreen And Analyz Properties?
Can anyone tell me what are the different expenses I will or could encounter in Multi-Family Bldgs? If I cannot find out this information from the current owner are there rule of thumb number for expenses? Such as: Insurance cost of the Gross Collected Rent, Taxes of the Purchase Price or Assessed Value, Maintenance and Management Fees. All comments are appreciatted. Thanks.
Ask the seller for their Schedule E - or whatever form they are using to report income and expenses to the IRS. It is both a legitamate and common request.
Common multi-family expenses include the following:
INSURANCE
MAINTENANCE (some people include this in maintenance: pest control, snow removal, landscaping, etc)
REPAIRS (some group maintenance and repair together)
ACCOUNTING/LEGAL
MANAGEMENT FEES (some include at least 5% to pay yourself if it is self managed)
LICENSES
ADVERTISING
UTILITIES
INSURANCE
TAXES
Your debt service, if you get a mortgage, is not counted in the Net Operating Income (income minus expenses). Your debt service is deducted from the Net Operating Income, and the result is your Cash Flow, either positive or negative.
Hope this helps.
Kim
Simply in view that the owner is not willing to give you his expenses is not reason to walk away. Additionally, schedule E may be entirely inaccurate. I suggest that you actually do the homework and ask each and everyone of the expense benefiacies what to expect.
Here are some typical expenses:
Utilities (Oil, Electric, Gas)
Management Expenses
Taxes
Insurance
Maintenance
Contract Cleaning
Supplies
*** If you are entirely unfamiliar with an area, you can pay an appraiser a few hundred bucks to put it together for you by using comparables***
Hope this helps.
It does help thank you all for the great feedback.