Repairs, Maintenance and Contract Services: How to Underwrite Them for an Apartment Building
On this page
A leaking roof flashing, a landscaping contract, a pest control visit: these are the everyday costs of an apartment building. They are easy to underbudget when a seller has deferred work to look profitable. This post shows how to underwrite repairs and maintenance and contract services so that your number holds in year one and after. It is part of our underwriting guides. General information, not investment advice.
Raising for an apartment deal? Start free
What belongs where
| Category | Examples | Where it goes |
|---|---|---|
| Repairs and maintenance | Plumbing fixes, appliance repair, door and lock repair, supplies | Operating expense |
| Contract services | Landscaping, pest control, trash removal contracts, snow removal, elevator service, fire alarm monitoring | Operating expense |
| Unit turns | Paint, flooring and cleaning between residents | Turnover line. See turnover costs |
| Capital items | New roof, repaving, new boilers | Capital plan. See the capital plan |
Moving costs between lines changes net operating income, so keep the same definitions as the lender and the CPA.
Step 1: Start from the T12
Review 12 to 24 months of detail, line by line. Look for unusual months, large one time items booked as R&M and items that were really capital. See reading the rent roll and T12.
Step 2: Look for deferred maintenance
If the seller has delayed work, the T12 understates the true cost. Signs include:
- Many units with open work orders.
- Visible roof, paving or exterior wear.
- A tiny R&M line for the building's age.
- Vendors who say they have not been called in years.
Pair this with property due diligence inspections.
Step 3: Quote the contracts
For each recurring service, get current quotes. Landscaping, pest control, snow removal and trash may rise at renewal. For an existing contract, ask when it ends and what it will cost next.
Step 4: Adjust for age and plan
- Older buildings often need more repairs. See old building systems.
- Renovated units may need less repair in the short term, but new finishes still wear.
- A change of manager can reveal work the previous owner skipped. See property management fee.
Step 5: Grow it with your own assumption
Maintenance costs tend to follow labor and material prices. Use your expense growth assumption, not rent growth. See expense growth assumptions.
A hypothetical example
This is an illustration with made up numbers, not a benchmark. A 90 unit building shows $27,000 of R&M in the seller's T12, or $300 a unit. The inspector finds many open work orders, and the manager's budget for a building of similar age is $585 a unit, or $52,650 for 90 units ($585 times 90). Underwriting the lower number would overstate net operating income by $25,650 ($52,650 minus $27,000). At a 6% cap rate, that is about $427,500 of value that the building would not support.
How DoorRaise fits in
DoorRaise does not maintain buildings. The sponsor and property manager handle operations, and DoorRaise handles the raise, the deal company, the investor paperwork and escrow. Sponsors pay a flat $1,500 setup fee and a flat $5,000 yearly administration fee.
Frequently asked questions
Is R&M the same as capital expenses?
No. R&M is routine and small. Capital items are large and extend a system's life. The line is partly a tax and accounting question.
How do I know if the seller's R&M is too low?
Compare it with the manager's budget for similar buildings and with inspection findings.
Should R&M grow with rent?
No. Grow it with the cost of labor and materials.
Sources
This article is general information as of November 2026, not legal, tax or investment advice. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.