Creating a reserve for Cap Ex, Turnover, etc
Would it make sense to take some of the money from a loan when financing a new property a create a reserve for cap ex, turn over, etc? When designing my model I planned to build up a reserve over time from the cash flow to cover these items. The thought came up when talking with my wife about future needs and how we were going to cover costs that are unexpected. The "beginning" reserve didn't make sense if I was going to hold 5%, rate on a 30 year loan, money in an account earning .20%. Then it did when I thought about things that could go wrong and my "ending" reserve didn't have enough to cover the items.