Mike Scott of apartment research firm Dupre+Scott has some shocking news for apartment building investors. While most lenders require a minimum reserve of $250 per unit per year for capital expenses and many owners reserve up to 400, according to actual expense budgets Mike tracked for properties in the Seattle area actual capital expenses have been averaging $750 a year for the last dozen years and the trend is definitely up:
These are actual CapEx expenses from actual properties and while they definitely vary from market to market, the cognitive error is probably about the same everywhere. Some investors may say well we only buy newer properties so that we don’t have CapEx to worry about. Unfortunately their research shows that even new properties are spending over $200/unit/year for CapEx:
For more details and charts see the article linked above. Apartment building investors in the Seattle area are lucky to have Dupre+Scott researching the real operating and capital costs for their local properties down to five units. Do you have a local firm researching the costs in for your size property in your local market? If you have found a good one post them in the comments.