What is the average annual per unit expense for an apartment building investment? Great reader question answered.

Mike in Milwaukee, WI, that is a great question. Answer: $3,000- 5,000/unit/year. How’s that for an accurate but relatively useless answer?  The real question is what is the annual expense per unit of the property you are looking at?  If you are a large institutional investor like a REIT looking at national or regional averages like those published in the NAA Annual Survey (See the included charts for results from the 2011 survey) can give you an indication but you can bet the institutional players know their own costs to the penny.

Apartment Building Operating Expenses Per Unit 2011
Source: NAA 2011 Survey of Operating and Income Expenses in Rental Apartment Communities

In most larger metros there are also companies who collect and publish apartment surveys showing the areas average rents, occupancy, expenses, etc. One thing to make sure of is that the survey is based on properties similar to yours.  There are a number of national companies doing multifamily research but they tend to focus on institutional sized properties 100 units and up so their numbers wouldn’t be comparable for a smaller property. For instance the average property in the NAA survey has about 250 units.

The most important number is the actual Continue reading What is the average annual per unit expense for an apartment building investment? Great reader question answered.

What drives changes in operating expenses (OPEX) for CRE and Multifamily? Nice research from CBRE Econometric Advisors

As every landlord knows, operating expenses (OPEX) are an important element of commercial real estate investment performance. In spite of the important role OPEX plays in investment performance, there is very little research that analyzes the structure of these costs or identifies what drives the differences in these costs across markets. This article aims to share the latest findings on the drivers and structure of OPEX.

… That industrial variable costs have a lower elasticity than those of the other property types accords with what investors in this asset class generally experience: that these properties are usually cheaper to operate. A perhaps more surprising finding is that the elasticity coefficients for office, multifamily, and retail—property types with significantly different operating structures—are fairly similar to one another. We are conducting further research to better understand this finding.

See the whole piece here: What Drives Operating Costs in Commercial Real Estate?