When planning to develop multi-family properties in North Carolina, it’s crucial to budget appropriately for operating expenses. The financial sustainability of a project often hinges on these recurring costs, which are influenced by a variety of factors. This guide highlights key operating and capital expenditures for 4 and 5-star properties in the Greensboro market and its surrounding areas.
Average Annual Costs per Square Foot
Across Greensboro and nearby regions, the total annual expenses for operating and maintaining multi-family properties range between $6.11 and $6.32 per square foot. Here’s a breakdown of what these costs include:
Operating Expenses
Management: At $0.38 per square foot, management fees remain consistent across all clusters.
Administrative Costs: Similarly, administrative costs hover around $0.80 per square foot.
Payroll: Payroll expenses also remain stable at $0.81 per square foot across the board.
Water and Utilities: Water is billed at approximately $0.35 per square foot, with utilities adding $0.60. These costs reflect essential infrastructure needs, ensuring tenants have access to reliable services.
Maintenance: Maintenance costs average $0.90 per square foot, covering routine repairs and upkeep essential for retaining the property’s quality.
Insurance and Taxes: Insurance costs are modest at $0.23 per square foot, while property taxes represent one of the higher expenses, ranging from $0.84 to $0.97 per square foot depending on the area.
Capital ExpendituresCapital costs include:
Appliances ($0.08 per square foot),
Structural Maintenance ($0.30 per square foot), and
Miscellaneous/Other Expenses (averaging $0.89 to $0.90 per square foot).
Notable Regional Variations
While the overall total expenses remain similar, slight variations exist depending on the market cluster:
Jamestown/High Point has the lowest total expenses at $6.11 per square foot, primarily due to reduced property taxes at $0.84.
Outlying Guilford County presents slightly reduced costs at $6.20 per square foot, thanks to modest tax rates ($0.89) and other efficiencies.
Most other clusters, including Downtown Greensboro, High Point, and Pleasant Garden, average at the higher end of the spectrum, around $6.32 per square foot.
Key Takeaways for Developers
Property Taxes Are a Major Driver: Taxes significantly influence total costs, with variances up to $0.13 per square foot between clusters. For developers, selecting a location with favorable tax rates could lead to substantial savings over time.
Maintenance and Utilities Require Attention: Combined, maintenance, water, and utilities represent nearly $2 per square foot of expenses, underscoring the importance of efficient property management systems.
Consistency Across Regions: Most operating costs, including payroll, management, and insurance, are consistent across the Greensboro area, simplifying cost estimation for developers.
Budgeting Varies By Location
It’s important to note that while this case study provides insights into North Carolina’s multi-family property expenses, operating costs can vary significantly by region. Understanding local regulations, taxes, and cost trends is essential when planning a development.
If you’re interested in analyzing operating expenses for your location or conducting a comprehensive multi-family feasibility study, contact us today. Our team is ready to assist with tailored insights and strategies to ensure your project’s success.
December 26, 2024, by Michal Mohelsky, principal of MMCG Invest, LLC
Sources: MMCG database, CMBS data
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