Posted by CAL on June 25, 2007 at 12:41:24:
This property has the chance to cashflow a little, but it is going to be WAY more expensive than you are currently figuring. Your expenses will likely be closer to $3000 than to $500. Expenses you haven’t mentioned yet may include:
Vacancy - figure on at least 5% even though it is fully leased right now.
Plumbing - I have the plumber out at my 16-unit at least once a month, usually more.
Legal fees - You will wind up having legal fees for evictions, collectoins,etc.
Property management - unless you are doing it yourself, figure somewhere between 8 and 10 percent of gross rent
Trash collection - you will most likely be required to have a dumpster on site
Electricity - for common areas and outside lighting
These are just a few that came to mind for me. It is true that expenses generally run close to 45% of gross rents. Even if you cannot think of where in the world all of that money could go, just use that number because it usually works out very close to it. That is before your debt service also.