When analyzing a mult-family deal, how would you estimate the pro-forma repairs and maintenance as % of gross?

Do you add reserve (% of gross) as well?
In Buying Property - Asked by BTS B. - Jul 20, 2011
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Answer(s)

terry g.
Developer
Beebe, SD

has a lot to do with number of units , type of utilitys gross income , age of units, n vacancy rate , no easy amswer to this question

Jul 20, 2011
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terry g.
Developer
Beebe, SD

oh most definately, 10%, of anual gross

Jul 20, 2011
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terry g.
Developer
Beebe, SD

yes

Jul 20, 2011
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NATHAN B.
Broker/Agent
Ontario, CA

Estimating projected repairs and maintence must be looked at carefully when dealing with any multi unit property and done so on a case by case basis. For example having to repair a roof and a couple of bad water heaters and a broker water line in the slab can quickly eat up much of your net income for the year and put you in the red. The older and larger and more complex a multi unit is the more expense should be allocated for repairs. I am Broker and a CA licensed General contractor (inactive status) and have purchased many projects of my own and actual repairs seem to be always more than projected. Old and run down = big repair and maintence costs. During your contingency period ensure you have the roof checked, all plumbing and electrical checked by licensed contractors that specialize in these areas and have a general inspection done as well. Have the main plumbing waste lines scoped to ensure there are not root intrusions, if it's a very old building and you have galvanized pipes be ready for water leaks etc. If the building is on septic ensure the tank it is pumped and inspected prior to purchase. All systems associated with a building have a finite life span and it's vital to understand this when investing in any type of property. Below is one of the many sites out there that point this out. The key is to do your homework and consult experts.

Jul 20, 2011
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Thomas R.
Broker/Agent
Bonita Springs, FL

As stated by others; it has a lot to do with the age of the units, type of construction, present condition of the units, price factors of the local market for parts and labor, and of course rental rates. Percentages are usually not the best way to guage costs. Cost per unit is a better method, but again, depends greatly of any number of factors.

Jul 21, 2011
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William C.
Broker/Agent
Pasadena, CA

Our experience has been that normal maintenance & repairs as well as the cost of fixing up a unit after it has been vacated runs somewhere between 5% - 10% of the gross annual income.

Jul 21, 2011
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David N.
Broker/Agent
San Francisco, CA

As others have stated, the answer to this question has much to do with the condition/location of the property, the number of units, type(s) of utilities, and several other factors. I've seen this number estimated in marketing statements as a per unit figure. However, the only real way to answer this is during your due diligence period - look at each unit; the entire building and figure out what costs you will incur based on what you find.
Good luck!

Jul 21, 2011
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Rick L.
Appraiser
Cleveland, OH

Get a BOMA Book that gives estimates of various cites and various properties. Call your libary or college book store.

Jul 22, 2011
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Gregg H.
Broker/Agent
Ontario, CA

It depends on area and but I estimate $60 - 80 a unit per month based on units age and condition and lay out this is just for maintenance repairs. after all deferred maintenance has been done.so investigate investigate before buying and all ways profit in the perches not in the sale.

Aug 10, 2011
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brenda l.
Property/Asset Manager
Las Vegas, NV

After all the calculations are on paper, I would probably look at and calculate the FMV and the GP.

Aug 11, 2011
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Montana S.
Broker/Agent
Scarsdale, NY

Personaly, I begin with a written inspection, calculate the cost of repairs, discuss these factors with the seller, if an agreement of sale can be reached; I subtract the cost of repairs from the purchase price and close within 30 days. This of course is not as easy as it sounds and sometimes requires taking the seller in as a partner. This formula works best for me when considering long term investments in multi unit properties. One must also consider the rental market. I believe development and management of properties is a key factor in acquiring wealth in this economic environment. Don't be afraid of partnerships, seize the moment.

Aug 12, 2011
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