RCRE - Operating Expenses 101

Jake and Gino Multifamily Investing Entrepreneurs

Jake & Gino

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5 • 831 Ratings

🗓️ 19 February 2020

⏱️ 33 minutes

🔗️ Recording | iTunes | RSS

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Summary

Dylan and Mike discuss operating expenses and the future risks of each Key Information: Management Fee= % of Income the property management in. Verify if other fees are included Repairs & Maintenance are recurring maintenance such as turn costs, touchup costs, etc R&M should be increasing at the rate as the Consumer Price Index (CPI) due to material costs General & Admin (G&A) includes office expenses, computers, technology, golf carts G&A will increase due to your management’s view on technology moving forward Contract Services include trash, landscaping, pest control, and other services Contract services will increase due to increasing wages Marketing Costs have shifted from being physical ads to technology Payroll includes salary, benefits, turnover costs, and continuing education Payroll will continue to increase because labor markets are continuing to be more competitive Utilities include water, electric, and gas for office, common areas, and vacant units Natural resources continue to increase in prices and you have to build a buffer just in case Property Tax increase on the front end when you purchase a property due to the assessed value is increasing to the market Property tax can also increase due to mill rates increasing Insurance has been increasing substantially from last year due to more claims being created Expert Pro Tip: Befriend property management companies Contact Information: www.randpartners.com [email protected] [email protected] For more information/to connect with Rand CRE: www.randcre.com To register to invest with us: https://invest.randpartnersllc.com/invexp/accounts/login/ Rand CRE's Facebook: https://www.facebook.com/randcre Rand CRE's Twitter: https://twitter.com/randcre Rand CRE's Linkedin: https://www.linkedin.com/company/randcre Rand CRE's Instagram: https://www.instagram.com/randcre

Transcript

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0:00.0	Welcome to the RANCRE show, commercial real estate with no stone left unturned.
0:09.9	What's up, everybody? This is Dylan Marma. I'm bringing to you the RANCRE show.
0:14.1	Joined by our co-host, Mike Taravella. How you doing today, Mike?
0:17.1	You know, just living the dream, making it happen, and excited to talk about our favorite topic expenses. Love to hear it. Always make it happen and live living the dream making it happen excited to talk about our favorite topic
0:21.5	expenses love to hear it always make it happen and live in the dream before we get
0:25.9	started always want to remind you the RAND series show is hosted by RAN commercial real estate
0:30.5	we are a vertically integrated real estate investment and advisory firm providing
0:34.5	opportunities for investors to create passive streams through investing in real
0:38.8	estate, as well as providing active investors with a place to come and source debt and equity
0:43.1	across the board. If you have any questions about how to fund your next deal, or if you'd like
0:46.9	to partner with us through investing passively, you can always reach out to us at rancore.com.
0:52.6	So for today's show, we have a topic that I think we're going to catch a lot of interest
0:57.0	because we've had a lot of folks reaching out with questions about expenses, right?
1:03.0	So there's a lot of talk, of course, about the income increasing and value-out investing
1:08.3	and how we can take the rents from from where they are today to where
1:11.9	they can be after your value is is completed right after you've invested into the property
1:18.5	your time and effort and your sweat equity and you've brought up to market rates but what doesn't
1:22.9	always get talked about quite as much and what oftentimes is overlooked is the expense increase,
1:30.0	right? Expense increase on an underwriting or a pro forma or oftentimes just represented as a 2%
1:37.9	or 2.5% increase year over year. But what we want to do is get a little bit more granular
1:43.1	than that and shed some light
1:44.5	on it for any active or passive investors in terms of what are the major line items that you're
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