Rental property cost benchmarks
I want to preface this by saying that these are my benchmarks — these are the numbers that I use for my personal analyses and what I’ve found to work well.
They do not work for everyone, every property, or every location, nor are they a hard rule — as we saw in the Follow Up: 4848 Matterhorn Deal Analysis newsletter.
For Capital Expenditures, my benchmarks are 5% and 2.5% for Conservative and Aggressive, respectively.
For Repairs & Maintenance, my benchmarks are 10% and 5% for Conservative and Aggressive, respectively.
For Property Management, my benchmarks are 11% and 8% for Conservative and Aggressive, respectively.
For Vacancy Rate, my benchmarks are 12% to 5% for Conservative and Aggressive, respectively.
Want feedback?
Do you have a deal you’re considering? Do you want me to take a look at it for you and provide feedback? Did you complete an analysis of a property yourself and want some feedback on the analysis itself? You can submit your deals and analyses for me to review by emailing the details to robert@therobertleonard.com
I also assume a 2% annual revenue and expense increase, as well as 5% sales commission, $3,000 in closing costs, and $10,000 in repair costs for when I go to sell the property.
If you’re investing in an expensive property, these numbers can often be a bit lower because the relationship between the average cost of a roof and property price isn’t linear. If you’re investing in a lower-priced property, sometimes these numbers need to be even higher than my Conversative figures.
The benchmarks are perfect, but for me, they are “close enough” and they allow me to analyze deals very quickly with a high conviction.
What are your benchmarks? What have you found works well where you invest or with what you invest in?
All the best,
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