Post #3 Dear Friends I wanted to sharpen the issue of operating expenses that I put into calculations ...
Post #3
Dear friends, I wanted to sharpen the issue of operating expenses that I put into the return calculations as well as the reference to insurance coverage I do for assets.
In the operating expenses, property taxes can be between 1% and 4% depending on the area of the property, I include VACANCY about 5%, and also LEASING FEE about 3.5% which I generally have not seen that developers include in expenses, of course they include HOA - neighborhood committee, in my areas there is no HOA, and about 5% repairs.
Below is an example of Excel's pre-tax expenses.
Regarding property insurance, I make sure to do a REPLACEMENT COST that also includes an index increase, as well as third party insurance of a minimum of $500000, adds coverage for vandalism, fires, the cost of such insurance ranges from $660 to $1000 in my areas. Trying to keep the deductible low between 500 and 2000 dollars.
In my response, there is an operating expenses file.
Hi Bracha Light For the benefit of investors who may rely on this information, I think it is worth giving 2 important points:
1- CAPEX is included in the business plan. I explained in a separate video and shared in the forum how to build such a plan before buying a property in the due diligence stages of the transaction.
https://www.youtube.com/watch?v=bfiRtyDmuzg&t=157s
2 - For insurance, it is important to note that the cover does not apply in every case, and the cases for which the cover is received depend on the level of insurance coverage selected. For example, LOSS OF RENTS, it's really not going to happen that a tenant will not pay you rent and the insurance will tell you ahh okay come on I'll pay you instead. No. It depends on what the case is. And in principle, this happens in the event that the loss of rent is due to an event that has insurance coverage in one of the other sections and then you will receive partial compensation for the loss of rent as well. Just make it clear to investors that sometimes a word like insurance is confused with guaranteed or safe. The only thing that is certain about insurance is that nothing in it is safe and must go in the lowercase.
From what I have seen to date among all the net axes will be between 50 and 60 Percentage of gross in the US Does that make sense?