Estimating Cost Of Repairs Per Unit
Can anyone suggest a reasonable amount to budget, per unit, for maintenance and repair? The building was build in 1920 and has 9 units. 3 of them have been remodelled, but not the others. The present owner states that the units are "virtually maintenance-free", but I'd like to err on the side of caution. Thank you! posherov
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You might see if you can get some estimates of maintenance and repair from the current owner. A good source is Schedule E of his/her tax return since he/she will try to deduct every possible expense.
I usually figure on about 11% of gross income for maintenance and repair but this may vary depending on the building. My most expensive was about 30%. This particular building was very management intensive. Typically, the larger buildings will require a higher percentage.
By the way, I have started investing in Indianapolis and I have seen a number of those buildings built in the early 1900s.
Thank you for responding!
The 11% you mention, is that just the units or does that take into consideration the entire building, ie security doors, roof, outside maintenance?
In evaluating whether this building is a good buy, I have budgeted $100 per unit per month as well as $500 per month for capital improvements to the building. Does that seem reasonable?
Thanks!
posherov
I mean the entire property. For 9 units you may be looking at a bit more. You might ask the owner why these are "maintenance free". It could be that there is deferred maintenance. I have a contractor in Indianapolis who looks at everthing I am interested in. If you would be interested in having him look at the building let me know.
Regards,
Ed
Sure Ed, that would be great! You can send me a PM with the info. Thank you!
polina