Multifamily Expense Assumptions
Beginning to analyze small acquisitions of multifamily properties, but find it difficult to obtain a T12 I&amp;E statement early on in the process. Most times all that is available is a rent roll. What are some safe assumptions (besides taxes, as I can just look that up and am not in a state where taxes are reassessed upon sale) for % of EGI for the rest of the expenses?
[{"id": "f6wlxvw", "text": "IREM income/expense analysis reports. They're not free but they break out expenses surveyed in different regions and major MSA's.", "replies": [], "depth": 1}, {"id": "f6wm20z", "text": "If you want to be real quick to pencil something out, I just use 40-50% expenses. \n\nOn the lower side if it's a new property, and closer to 50 if its older. \n\nYou will come across some property, maybe managed by the owner himself, that claim they have under 30% expenses. They dont. They often dont count management, reserve replacement, they do a lot of maintenance themselves, cleaning themselves etc etc is how they get thei expenses down because they dont count the work they do themselves.\n\nPretty much any property I have seen is going to run at least 40% actual expenses or more. Just in my experience though. I'm sure you will get people telling you they run 30.", "replies": [{"id": "f6wnerl", "text": "This is safe advice.  But in higher rent areas 35% is not uncommon", "replies": [{"id": "f6wqis0", "text": "Agreed.  If you were running 50% or even 40% expenses in my market you would be grossly mismanaging.", "replies": [], "depth": 3}, {"id": "f6wsx8v", "text": "I am in a VHCOL area and we own many rental properties (commercial multies). 35% is very accurate.", "replies": [], "depth": 3}, {"id": "f6wtugw", "text": "Good point. If you are getting high rent and managing well I can totally understand getting those numbers. \n\nAs with anything, location makes a big difference. I am not in one of the ultra high cost if living locations.", "replies": [], "depth": 3}], "depth": 2}, {"id": "f6xhgc1", "text": "Or they have 10% of the value waiting in deferred maintenance. You see that a lot.", "replies": [{"id": "f6xizcf", "text": "Yes", "replies": [], "depth": 3}], "depth": 2}, {"id": "f73xqy1", "text": "40-50% of what?", "replies": [{"id": "f74fim1", "text": "Income of the property.", "replies": [{"id": "f74ghbi", "text": "40-50% or total revenue goes towards Expenses? ? Wow", "replies": [{"id": "f74j6m4", "text": "For multifamily rentals yes.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f6x49e3", "text": "What do you think you are analyzing if you are using made up numbers?  You should know actual numbers from actual properties.  There are several paid for sources but you could also talk to a commercial appraiser in the Assessor office.  Buy them lunch and they'd probably provide you income and expense statements for your property type.", "replies": [{"id": "f6yb578", "text": "I agree with you. But I\u2019m just asking for back of the napkin to see if it\u2019s even a deal I should consider. Unfortunately in the area I\u2019m in, it\u2019s a lot of residential brokers handling these small properties and they don\u2019t understand the process. Difficult to deal with, but chance of taking advatange", "replies": [{"id": "f6yd25j", "text": "&gt;I agree with you. But I\u2019m just asking for back of the napkin to see if it\u2019s even a deal I should consider. \n\nThere is NO \"back of the napkin\" calculations that tell you if a \"deal\" is worth consideration.  You have been scammed.  Please educate me on how you have been bamboozled so we can prevent others from this scam.", "replies": [{"id": "f6yi8h9", "text": "You are thinking way too far down the road. I\u2019m just talking about initial guidance when looking at a deal. At no point would I consider going under contract in this situation, I am merely just asking what would be an appropriate consideration. Clearly other people had an appropriate response", "replies": [{"id": "f70vsxf", "text": "&gt;Clearly other people had an appropriate response\n\nWhich varied from less than 30% to 50%!   Even your question was not clear as are you asking for operating expenses, capex, mortgages, geez WHAT?  OK, complainty pants on.  Please provide your napkin crap that tied together with this over 20% spread of \"expenses\" leads you to \"see if it\u2019s even a deal I should consider.\"", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "f7k2z38", "text": "&gt; it\u2019s a lot of residential brokers handling these small properties and they don\u2019t understand the process. Difficult to deal with, but chance of taking advatange\n\nOK, why can't you explain your \"back of the napkin\" calculations that will enable you to take advantage.  I think you might have your ass handed to you.", "replies": [{"id": "f7kr98i", "text": "jesus man you dont quit lol, you really have been thinking about this for 6 days? My ultimate point is essentially, I am just trying filter out the 100's of deals listed for sale on Co-Star, as in my area, most listings just show you the rent roll. Wanted to get an idea of a safe assumption of expenses so I can see if contacting the broker might even be worth the time.", "replies": [{"id": "f7llw8c", "text": "&gt;  I am just trying filter out the 100's of deals listed for sale on Co-Star\nAnd exactly how are you accomplishing that?  That is what you are claiming and I am telling you that you are not accomplishing that.  Plain and simple otherwise you would explain your process instead of stating the goal.\n\nI do rail against people that make crazy analysis claims when all they are doing is pushing fake numbers around.  The youtube is full of bullsh*tters claiming \"back of the napkin\" processes and mentorships that will lead you to the passive road to riches.  There is a \"wannabe guru\" trading on his military service promoting his \"analysis\" that leads to screening out any property where the asking price is more than 12 X 7 X rents.  He doesn't have a clue why that screens things out and in truth it doesn't because even in his ignorance all he is doing is saying don't look if the GRM is over 7!  Would you agree that he is accomplishing nothing?  \n\nSo I am only trying to educate you so you only look foolish on the internet instead of IRL.  So if I am wrong, educate me.", "replies": [{"id": "f7lnkf0", "text": "trust me, im coming from a much higher level than taking youtube classes. Was just trying to get a general idea man, but thanks for your input.", "replies": [{"id": "f7lo3mr", "text": "So you are on this high level but can't explain your screening process.  That is typical youtube talk.  Seriously, your post would have novices thinking there is some super process that makes picking profitable properties easy peasy but you can't simply explain it.  Why?  That's what I call bull on.", "replies": [], "depth": 7}], "depth": 6}, {"id": "f7lo7m0", "text": "Freddie Mac clearly analyzes operating expense ratios. So to simply my original question since you made it more complicated than it had to be, I wanted to know what a healthy opex ration is.", "replies": [{"id": "f7lpo6y", "text": "&gt;I wanted to know what a healthy opex ration is.\n\nThat's not a bad question from a novice.  Except you did not identify location or even narrow down asset type more than small multifamily.  And you got a very broad range because your question was so flawed.  \n\nBut you claim you can use this information to filter out properties.  I am still asking how.  Why can't you answer this question for me and all that have contributed?  I say because you can't.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "f7lvfrk", "text": "&gt;jesus man you dont quit lol, you really have been thinking about this for 6 days?\n\nNot at all.  I wanted to give you a chance to reply.  You didn't.  This is called follow up.  Learn it as it will help you in your real estate endeavors.", "replies": [{"id": "f7lwt9j", "text": ".....i was the last response???? But just clicked your profile and see you like to argue here, makes sense.", "replies": [{"id": "f7lxfvz", "text": "&gt; But just clicked your profile and see you like to argue here, makes sense.\n\nArgue?  Dude, I just called you out on your BS and you keep proving me correct.", "replies": [{"id": "f7m0kpf", "text": "Ok hardo, I came here asking a question. You were the only one who gave a smart ass answer. Fuck boy", "replies": [{"id": "f7m4t56", "text": "&gt; who gave a smart ass answer. Fuck boy\n\nTypical scammer behavior.  \n1.  Don't answer question, deflect.\n2.  Attack questioner.\n3.  Belittle good information.\n4.  Claim no one else wants answer.\n5.  Use foul language.\n\nWhat is worse than a scammer, a wannabe scammer!\nUm, good luck with that.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f6xaqm1", "text": "Don\u2019t forget to assume property taxes will be reassessed once the sale is wrapped up.", "replies": [{"id": "f6xd4h5", "text": "He said his state does not reassess on sale.", "replies": [{"id": "f6xjj9e", "text": "What state is the property in?", "replies": [{"id": "f6xk50e", "text": "I have no idea.  Maybe the OP will answer.", "replies": [{"id": "f6yb66b", "text": "NJ", "replies": [{"id": "f7exqjj", "text": "Verify with the city before you assume the taxes will stay the same. How long has he owned the property?", "replies": [{"id": "f7f5wds", "text": "this was just a general question, there isnt one property in mind. Essentially, I am just to filter out the 100's of deals listed for sale on Co-Star, as in my area, most listings just show you the rent roll. Wanted to get an idea of a safe assumption of expenses so I can see if contacting the broker might even be worth the time.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]