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WHAT WOULD PAYROLL GO TOWARDS (BUDGETS) IF I ALREADY HAVE COST FOR MAINTENANCE AND MANAGEMENT?...Prince K.
Payroll is a separate, additional item. The 3 to 5% in management fees takes care of management overhead, accounting for the property, regionals, etc. Maintenance and repairs are for property costs i.e. cleaning carpets, painting units at turns, HVAC repairs (not replacements) etc. You DO want to check in your particular property financials that they aren't rolling in those costs in an unusual category. The smaller the property the higher the chance of expenses being put in unconventional, or unique categories. You can ask the broker or owner of its not clear...just ask for a payroll summary and ask what category those payroll expenses (the manager and maintenance people) are charged to. For example, I might ask, "I'm having trouble tying out the payroll expenses, where are they allocated?"
HOW IMPORTANT IS IT TO USE NOI AND CAP RATES TO EVALUATE A 3-FAMILY RESIDENCE? I KNOW FOR THE BIGGER COMPLEXES THAT ITS ESSENTIAL, JUST DIDN'T KNOW IF YOU USED THEM WHEN YOU WERE STILL BUYING RESIDENTIAL PROPERTIES RATHER THAN COMMERCIAL...Ryan R.
Simply stated, not as important. Their prices are based on comps. You do need to know your return on your investment (ROI) but you do not base price on that.