Calculating Expenses On Rental Peoperty
I am looking at multi-familly (3-4 unit) properties to buy and hold. I am trying to calculate expenses on rental property. Please let me know if you think the following numbers are enough. From the gross monthly rent, I will take the following:
5% for vacancy
5% for non-payment of rent (renters stiffing you)
5% for current maintenance/a toilet needs fixing, leak in roof, dripping faucet, etc.
5% for deferred maintenance/major improvements, such as new roof, kitchen, etc.
Are these numbers to high or to low? Should I also add an additional 5% for a management fee, even though I will be managing the property (the fee is in case I decide I want to hire a manager)? Would these numbers be the same for a 1 family house?
Thank you.
5% for vacancy, probably low for apartments, I'd allow 7%
5% for non-payment, probably high, you do get to keep the deposit, maybe 3%
5% for maintenance, not knowing your properties, I would allow 10%
5% deffered maintenance, should do it
5% for management, I don't know of anyone who does it for that. I would allow 9% which seems to be common although I pay 7% for most of my properties
I would also add at least 5% to the catchall category. You can definately anticipate paying for things you did not anticipate
What about Taxes, insurance, utilities?
Make a few calls and you'll get a better feel. 25-30% is probably what I would expect for a blanket expense, but it's always better to find out specifically. It will vary from area to area, city to city, and state to state.
set up a trust and calculate taxes at what they are....insurance contact an insurance company...utilities make the tennant pay for them.