![]() ![]() All things I’m sure you’ve experienced as an owner-operator of a multifamily property! Thanks for taking the time to leave a comment.Īctual property expenses will vary by: age class style renter demographics number of units management preference submarket market cycle supply and demand operation policies etc. Multifamily Property Checklist: An Owner’s Guide for Operating Apartment Buildings Related Articlesĥ Big Multifamily Deal Analysis Mistakes to AvoidĬreating an Annual Operating Budget for Your Multifamily Property Or, why wait? Contact me directly with any questions you have. Please visit my Real Estate Mentoring and Consultancy Services page for more information. In addition to mentoring programs I offer one-on-one private consulting for specific deal and property analysis. Until you become proficient with property analysis, work with a multifamily mentor or apartment building owner operator to analyze any deal you are considering making an offer on. But with some practice analyzing deals-as many as you can-you will be become more educated and less likely to miss something. It’s almost impossible to foresee every eventuality. Unexpected apartment building operating and renovation expensesĪs a new apartment building owner you will incur unexpected expenses. This spreadsheet includes two properties totaling 45 units. The following spreadsheet will give you a good idea of the number and variety of expenses you will incur as an apartment building owner. Typical apartment building operating expenses It is not enough to rely on the broadly categorized expenses presented by a seller or by a commercial broker. Always get a property’s historical operating dataĪs I’ve already said, always, always use the historical property operating data when analyzing properties. Even five-star hotels and new Class A apartment buildings can-and do-become infested.Īgain, without historical numbers and a baseline to compare expenses to, you might miss noticing an abnormally high pest control number. Bed bugs are becoming more and more common. An unusually high number could be a red flag for a serious problem such as bed bugs, which can infest an entire property. Pest control is a common property operating cost but the number is typically fairly low. The price for pest control is often included under the “Repair and Maintenance” category. This could be a red flag for serious plumbing issues.īut without a baseline I might completely miss the water bill is high in comparison to similar properties. Such as, if I see an atypically high cost for “Water” I know I need to investigate further. This gives me a good baseline for typical property expenses. When I look at properties in any market I analyze at least five similar deals to the ones I’m interested in purchasing. And to accurately assess potential problems and opportunities. Without line item expenses it’s almost impossible to knowledgeably analyze a deal. Trash (sometimes included in utilities). ![]() Expenses can be left out.įor example the simple category “Utilities” will include: Without itemized line items you can miss red flags. The problem with broadly categorized property expenses is that you cannot drill down to specific costs. Before I agree to a showing and before I consider making an offer on an apartment building or any multifamily property. When I analyze deals I ask to see these numbers up front. Your bank or lender will want to see historical cash flow figures for the property going back at least one year, preferably two. Until you get your hands on the seller’s historical property operating numbers it’s almost impossible to get an exact understanding of the property.Īnd it’s your job to get this information. Expenses as listed in an apartment building offering memorandum (brochure)Īpartment building offering memorandums (sales listing brochures) typically list property operating expenses in general, broad categories almost always like this:Īs I said, fairly broad categories. Today we’re going to talk about expenses. Comprehensive capital expenditure projections.Detailed property operating income and expenses.This question is almost impossible to accurately answer without: It’s the most often asked question I receive: How do I know if a deal is a good one or not? ![]()
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