Opex for full gut rehab - Multifamily
Assuming 1970's construction Class C apartment building in San Diego. Decent neighborhood.
Full gut renovation with 2019 plumbing, electrical, roof, windows, everything, Is it possible to hit 30% expenses due to the effective age of the building being nearly new?
Some basics are below.
30 Units - Pool - Sauna (currently non-op) - 2 story - Flat top roof - almost no landscaping
(20) 2/1's @ $2250mo
(19) 1/1's @ $1775mo
(1) 0/1 @ $1350
(10) 2 car garages @ $250mo
GSI = $730,200
Vac = -$22,000 (3%)
Onsite rent credit = -$10,800
Laundry = $3000
EGI = $700,494
Your thoughts on expenses?
Assuming you have the utilities submetered and billed back to the tenants (not sure you can do this on this vintage though) and you don't trigger a Prop 13 reassessment, I'd expect you'd be able to make that math work. Also really depends on how you staff it / what sort of mgmt. fee you're underwriting. Your economies of scale burn at this size though.
All units are separately metered and tenants in San Diego are just beginning to pay RUBS, so we may be able to collect some utility income.
This is a value add acquisition with a price of 7mil. Management I'm projecting at 5%.
Don't think it would be RUBS if they are individually metered (unsure if there is nuance there legally... i.e. a true RUBS system vs separately metered units).
Mgmt. fee of $35k isn't likely to get anyone's panties wet, but there could be an operator out there that would do that. Not my dojo but I could see that working.
Assuming mechanical is done too? CA passed a new law that you can't create a rubs program if it wasn't in place as of 1/1/18.
i would be surprised if you can get sub-40%, especially at those rents. Maybe if you were getting $4 PSF the OPEX margins would skinny down due to the whole dollar impact of your expenses being smaller relative to EGI, but the rents you referenced feel like low $2 PSF.
Maybe you can get closer with sparse landscaping, saltwater pool, skinnied up staffing...as other have mentioned the assessed value is obviously the big kicker.
30% would be $5250/door which seems reasonable to me but i'm NOT in a high-COL market like socal and have NO idea what shit costs there. property taxes are probalby high as fuck right?
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