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Maintenance and repairs on office rental property
Posted on 2/18/16 at 8:32 am
Posted on 2/18/16 at 8:32 am
I'm considering buying a small multi-tenant office building. My other properties are all single tenant NNN leases, so I'm not experienced with how much I need to assume for repairs and maintenance when projecting a cap rate on my offer.
Looking around, I'm seeing from 1-3% of property value. This obviously depends on age and complexity of building, but 3% seems very high, even 1% seems more than I would expect.
Any ideas?
Looking around, I'm seeing from 1-3% of property value. This obviously depends on age and complexity of building, but 3% seems very high, even 1% seems more than I would expect.
Any ideas?
2
Posted on 2/18/16 at 11:56 am to Ole War Skule
$0.10 - $0.25 / SF for replacement reserves.
Posted on 2/18/16 at 12:00 pm to Ole War Skule
I would definitely get historical financials on the property. This will be the best indicator of what to expect for the future of the property in regards to all income and expenses.
I would call a local commercial appraiser. Obviously if you personally know one they'd be likely to help out. An appraiser you don't know may help you out if they're nice. They can most likely give you comps and some income/expense information as well.
ETA: Just a general idea, you're probably looking at around $5 per square foot of expenses (can obviously vary based on age/location/previous upkeep). Taxes will be whatever the tax amount is. Insurance $0.30, Repairs/Maintenance $0.50, Cleaning/Janitorial $0.75, General/Administrative $0.25 and Management fee will vary from 3%-5% of Effective Gross Income (Income after vacancy). All of that being per square foot.
I would call a local commercial appraiser. Obviously if you personally know one they'd be likely to help out. An appraiser you don't know may help you out if they're nice. They can most likely give you comps and some income/expense information as well.
ETA: Just a general idea, you're probably looking at around $5 per square foot of expenses (can obviously vary based on age/location/previous upkeep). Taxes will be whatever the tax amount is. Insurance $0.30, Repairs/Maintenance $0.50, Cleaning/Janitorial $0.75, General/Administrative $0.25 and Management fee will vary from 3%-5% of Effective Gross Income (Income after vacancy). All of that being per square foot.
This post was edited on 2/18/16 at 12:06 pm
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