What's your typical operating expenses percentage of gross rents? 20%? 10%? 5%? (to make NOI)

In Selling Property - Asked by Alex K. - Aug 30, 2009
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Answer(s)

Walter S.
Researcher
Columbus, OH

Normally 50% for Multi Familys over 30 units, otherwise 35%-40%.
The best is, you have a actual profit & loss.

Aug 30, 2009
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Louis N.
Broker/Agent
Winter Park, FL

Several organizations sell compiled national data. The trade organizations (NAA, ICSC, etc) do, as does IREM.

Aug 31, 2009
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Eric A.
Lender/Mortgage Broker
Union Beach, NJ

I'm not entirely sure how it is done from a listing/selling perspective, but when we underwrite a commercial loan we work with various percentages.
Maint./Repair - 5%-10%
Legal/Accounting, Supplies/Janitorial 2%-5%
Utilities. - Actual Cost
Taxes and Ins. - Actual cost plus gross up for transfer to new ownership
Vacancy Factor - 5% to 20% depending on market conditions and segment
Each lender then adds additional reductions or expenses according to their guidelines.
Hope this helps out somewhat.

Aug 31, 2009
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Gregory NNN G.
Broker/Agent
San Francisco, CA

Are we talking office, apartment, retail, hospitality... it all depends on the product type and size.
http://www.gregorygarver.com

Sep 1, 2009
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Paul S.
Broker/Agent
Glendora, CA

The answer to your question is somewhat dependent on the type of property and where it is. An old apartment building is going to have more expense than a newer one most likely? Of course if you are a slum lord it may not? A commercial building may have some of the expenses passed back to the tenants. A NNN leased property has the tenant paying all the expenses. I can't imagine owning an apartment building with 50% expenses? Most of my clients come in at around the 30% mark or less. They are doing the management themselves however so there is a savings there. A lender will take a different view of the expenses. Not only will they look at the actual expenses, often a management percentage will be added in regardless of whether it actually exists. Same holds true with a vacancy factor. Keep in mind lenders are looking to estimate a "safe" margin to lend on. If I operate something with 25% expenses a lender may add in estimated expenses (that may not actually exist) that increases them to 35%. That will alter the DCR (debt coverage ratio) which will usually result in a higher downpayment.
Paul Sylvester, CCIM

Sep 2, 2009
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Chris S.
Broker/Agent
Coeur D Alene, ID

What type of property?
Your operating expenses are YOUR operating expenses, not some ratio that comes out of the sky. Yes there are some industry, product type averages, but it's not universally applied.

Jan 22, 2010
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Dale D.
Appraiser
San Fernando, CA

can you provide a breakdown of the expense % for a motel of 30 units. How much for cleaning, laundry.management.etc.

Nov 1, 2011
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Jamshed S.
Broker/Agent
Edwardsville, IL

There are many factors that need to be known before an answer is given, for instance, what kind of property, what utilities are paid by owner, etc.
In general, a typical expense ratio is between 40% - 60%.

Sep 25, 2013
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