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How Much CapEx Do You Need to Include in Your Pro Forma?

Ben Leybovich
3 min read
How Much CapEx Do You Need to Include in Your Pro Forma?

I’ve finally, after about 4 or 5 years, formulated in my own mind what BiggerPockets is. I think it’s in many ways a microcosm of this thing we call life, and I’ve arrived at a simple description, which is this:

BiggerPockets is an ongoing struggle between ignorance and optimism.

Chew on that. 🙂

Once in a while, though, someone who is neither ignorant nor overly optimistic asks one of those profoundly insightful questions, indicative of the fact that they are thinking! One of these questions that comes up is:

How Much CapEx Do You Need to Pro Forma?

Now — before I begin, it seems appropriate to warn you. When I was on Cardone Zone with Grant Cardone, he said that if everyone listened to me, no one would ever do a deal. He said I am too pessimistic — always glass half full. I guess I’d rather do that than lose money!

I am about to give you real dollar amounts from real deals happening today. I am sorry if you don’t like them and agree with Cardone, but I sorta don’t care. He has teams of underwriters to make sure he doesn’t make a mistake; you do not. I am here to save you money. Take it or leave it!


Related: How to Estimate Future CapEx Expenses on a Rental Property

The Accepted Norm

When we underwrite, it is common to see something in the neighborhood of $250-$300/door for CapEx reserves. This line-item is present in the pro forma to represent the moneys we set aside for future expenses that we know will come up — things we don’t need to do now, but sometime during our ownership will likely have to do.

So, the question is, would $300/door be enough in real world conditions?


As we speak I am sitting on a balcony of my second floor unit in Arizona — I’ve moved from Ohio. But as I sit here, a roof is being replaced on a triplex I’ve owned since 2006 in Lima. I am paying $240/square for labor and materials, plus $2.40/linear foot of spouting. The total is a bit under $7,500.

So, let’s do the math — $7,500 over 10 years, over 3 units is $250.

$7,500/10 years/3 units = $250/door

Thus, had I spent no other moneys, the CapEx reserve would have had to be $250/door. Naturally, however, I’ve replaced flooring, bought appliances, and painted on multiple occasions at that building. The real cost is almost twice — take it or bury your head in the sand.



I just sold a 6-unit I’d owned since 2011. When I bought it, I put $12,000 into the building right away — all CapEx items like roof, flooring, appliances, bath remodel, etc.

Related: Investors: Think It’s OK to Skimp on CapEx? Here’s Why That Could Cost You BIG.

Over the hold period, I spent about $12,000 more out of the cash flow. Thus, I deployed about $24,000 for CapEx. So, how much is this per door?

$24,000/6/5 = $800/door

Yes, this was a re-positioning project. And yes, this was an older building. And yes, I knew this was going to happen, and it did!

And I don’t mean to tell you that if CapEx is high, you cannot make money. This 6-unit made me 44% IRR all in, which is not bad. And, it was a no money down deal.

So, yeah, you can make money just fine, but you have to know this stuff is coming!


I keep telling you guys to quit using rules of thumb in your thinking. Yes, there are averages, but they need to be heavily adjusted for each deal’s specifics. The difficult part for those of you who are new is that it’s a lot easier to know what will happen in the future if you’ve got the past — which you do not. But this is why I am here!

How do you estimate CapEx expenses when projecting cash flow on your properties?

Let me know with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.