Property Expenses

Discussion in 'Property Management' started by Propertyman, 3rd Aug, 2016.

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  1. Propertyman

    Propertyman Well-Known Member

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    Hi guys,

    I am trying to make a spreadsheet which shows my future cash flow position based on future purchase assumptions etc. Is there a rule of thumb for property expenses? a % of rent?

    I listen to the Property Couch and they use 1.5% of the purchase price (indexed at 3%) for property expenses (excluding management). Does this seem fair or is this too low you think?

    Thanks in advance
     
  2. ashish1137

    ashish1137 Well-Known Member

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    Consider 13 wells of rent as an expense. Figure out the rest. :)
     
  3. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I use 25% usually.
     
  4. Blacky

    Blacky Well-Known Member

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    I generally assume 30% of income.
    Ashish uses 25%

    Pretty close.
     
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  5. Propertyman

    Propertyman Well-Known Member

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    Great thanks for the feedback
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    The problem with using a function of the purchase price is that it doesn't scale well in many instances. Rates notices in cheap areas aren't proportionately linear to those in expensive areas.

    Most lenders use a function of the rent, 20% - 30%. I go with 25% myself.
     
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  7. New Town

    New Town Well-Known Member

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    My cheapies in QLD regionals on $250- $300pw rent can ezy run to 40%.

    Hence big gross yields of 8% plus barely breakeven after high rates, high PM fees, high insurance etc etc
     
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  8. ashish1137

    ashish1137 Well-Known Member

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    I think that is a biggie to consider.

    • Unit and apartments tend to increase budgets.
    • PMs usually charge 5 or 6%, i think.
    • Maintenance, I prefer newish house. Rather I have bought all land and houses till now. There is no old property in my portfolio.
    • Depriciation on new houses is an added benefit (nearly 1% increase in yield).
    Hence, I am taking the standard of 25% or 13 weeks of rent. Even though, I think it should be less than that but who knows for sure? :confused:

    Regards