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Location: not sure, but there's a hell of a lot of water around here!
2,682 posts, read 7,575,502 times
Reputation: 3882
Quote:
Originally Posted by honobob
Loans, Fee purchases, land purchases, cable, electricity etc.
It's a futile argument from the start, but the vast majority of expenditures related to maintenance fees are all operating expenses. At least on the properties that I'm involved with.
It's a futile argument from the start, but the vast majority of expenditures related to maintenance fees are all operating expenses. At least on the properties that I'm involved with.
I don't see where there's an argument. It's simply a matter of education. The average home owner has no need to know or understand a cap rate.
If the HOA's you're familiar with are not collecting monies for reserves they are poor managers and probably breaking Hawaii laws. The only reason to not be collecting for reserves is they are over funded or under funded. Both situations are not fair to the owners. If I buy a condo that has not been collecting for a twenty year roof that needs replacement in 5 years then the current owner is shafting me by not paying his share for the last 15 years. If the HOA is over funded then I have bought two roofs and when I sell the new owner will benefit from my overpayment.
Either way operating expenses are what they are and only they should be subtracted from income in addition to V/C to get NOI to be used for a cap rate computation.
I don't see where there's an argument. It's simply a matter of education. The average home owner has no need to know or understand a cap rate.
I agree. The average homeowner doesn't need to know a cap rate. But someone looking into rental income should as one of the metrics to compare properties
I agree. The average homeowner doesn't need to know a cap rate. But someone looking into rental income should as one of the metrics to compare properties
How do you "compare" properties using a cap rate? All a cap rate does is report the ratio of NOI to sold price for a specific property type in a particular market in a certain time period.
Location: not sure, but there's a hell of a lot of water around here!
2,682 posts, read 7,575,502 times
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This is why I said 'futile'. Monies collected as maintenance fees that are placed into the reserve are there to offset future maintenance costs. Hence, all the money collected, is for operating expenses, both immediate, as in electric, gas, insurance, and future, as in roof replacement, painting, parking lot re-surfacing, etc.
How do you "compare" properties using a cap rate? All a cap rate does is report the ratio of NOI to sold price for a specific property type in a particular market in a certain time period.
Lets pretend I want a rental property in Waikiki. Both cost $700K. Property 1 has a cap rate of 3%. Property 2 has a cap rate of 7%. Guess what. Property 2 has more of my attention.
Lets pretend I want a rental property in Waikiki. Both cost $700K. Property 1 has a cap rate of 3%. Property 2 has a cap rate of 7%. Guess what. Property 2 has more of my attention.
This is why I said 'futile'. Monies collected as maintenance fees that are placed into the reserve are there to offset future maintenance costs. Hence, all the money collected, is for operating expenses, both immediate, as in electric, gas, insurance, and future, as in roof replacement, painting, parking lot re-surfacing, etc.
Auwe, ha'awi mai i maha
Cap rates are computed using only ONE year of income and operating expenses. If you use under or over stated expenses (more/less than one year) then your "cap rate" loses its utility. It actually isn't a cap rate.
Think it thru..you are trying to use one years income but subtracting multiple years expenses. See how that makes no sense?
Location: not sure, but there's a hell of a lot of water around here!
2,682 posts, read 7,575,502 times
Reputation: 3882
Quote:
Originally Posted by honobob
Cap rates are computed using only ONE year of income and operating expenses. If you use under or over stated expenses (more/less than one year) then your "cap rate" loses its utility. It actually isn't a cap rate.
Think it thru..you are trying to use one years income but subtracting multiple years expenses. See how that makes no sense?
I wasn't referring to the cap rate. I was strictly referring to the maintenance costs. Read it through. And have a nice weekend.
Ho'omimi i loko ka makani
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