How can one determine typical operating costs so net income can be established?

Of course after owning a few properties I'll have database for this information. But coming out of the gate I don't want to end up with too low of an anticipated Cap Rate by estimating too high. Or vice versa. Talking with a good agent or property manager seems like a good idea. Are there any journals/publications? I am in Bergen County, NJ and I anticipate my 1st property would be a small multifamily/office/retail or perhaps a mixture of these types. About 2,000 to 5,000 SF. 300K to 800K.
In Buying Property - Asked by Larry K. - Jul 1, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

If you have experience rely on it. Most of the time a seller will underestimate operating costs to helpl the property look good. A little here a little there and bingo a higher cap. When looking at properties listed for sale you will get a "feel" for typical expenses. Add to it your own knowledge and come up with something you feel is valid. If you are looking at multifamily listed by residential agents you will often find the expenses completely lacking and therefore no cap rate. You will need to let your own experience kick in and calculate it yourself.

Jul 2, 2009
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ALBERTO S.
Owner/Investor
Bellflower, CA

BY ADD ALL INCOME FIRST THAN DIDACT ALL ESPENCES THAT INCLUDES INSURANCE MAINTAINED EXPENCESS ELECTRIC BILL WATER BILL AND DISSPOSALS BILLS WAT YOU HAVE LEFT AFTER ALL THOWS DIDACTIONS WILL BE YOUR NET INCOME

Jul 2, 2009
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Zully R.
Broker/Agent
Miami, FL

A true cap rate includes all fixed and operating expenses. In Miami, Florida the percentage of expense is about 45% of the gross income.
Make sure you include the accountant fees and add to operational expenses an additional 5% for vacancy and another 2% for extra maintenance. Permit fees have increased. When you add all of the expenses, deduct it from the gross revenue, try not to include laundry etc. ( this fluctuates too much) and divided by the cap rate you expect. this should give you a fair price 7-9 cap rates are achievable because you have other goodies such as depreciation and valuation which will start in the next five years. (use 2% yearly)

Jul 2, 2009
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David B.
Owner/Investor
Santa Rosa, CA

due dilligence. you dig in, and take each and every expense, inquire personally. Example. Utilities. take the last 2 yrs. add in the next yrs increases. most sellers lie about costs and expense. do not take Anything for granted.............

Jul 3, 2009
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