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

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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!

About Author

Ben Leybovich

Ben has been investing in multifamily residential real estate for over a decade. An expert in creative financing, he has been a guest on numerous real estate-related podcasts, including the BiggerPockets Podcast. He was also featured on the cover of REI Wealth Monthly and is a public speaker at events across the country. Most recently, he invested $20 million along with a partner into 215 units spread over two apartment communities in Phoenix. Ben is the creator of Cash Flow Freedom University and the author of House Hacking. Learn more about him at


  1. Moshe H.

    2 questions, Ben (for now!)
    1. Is it fair to say that you have to take the cost of the roof replacement now and divide it by the amount of time you’ve owned the property? In other words, isn’t that roof going to last for 20 years? So if you take a 30-year birds’ eye view, you’ll have replaced the roof twice during that time (once after 10y and once after another 20y) to the tune of $15,000 over 30 years, which works out to $166.67/year/door… quite a bit less! I know “in real life” you’ve now spent $250/yr/door propagating back over the length of time you’ve owned it, but surely your property is also worth more right now with a brand new roof than it was a month ago with a failing roof.
    2. How does a guy like me who has no experience actually come up with realistic numbers?


  2. Ben Leybovich

    Moshe –

    1. You are missing the point a bit. When I bought the building, I inspected the roof and knew that in 8-10 years it’ll need to be replaced. From the date of purchase, if I were to set aside the cost of replacement in 8-10 years, I’d have had to put aside $250/door. It matters not how many years the roof is good for, because I am not planning on owning the building for that long anyway. What matters is my replacement costs during ownership…

    2. By listening to a guy like me with a decade of experience 🙂

  3. Chad Carson

    Like the article. CapEx isn’t a sexy topic, as you say, but it can’t be written about enough.

    Just curious – what it your delineation between CapEx and maintenance? Do you know how much you spent on regular maintenance during the 6-plex ownership, for example? And what kinds of things did you spend $12,000 on during the same time period with 6-unit?

    I think the worst mistake is to ignore CapEx altogether. But I also have seen people including maintenance and capex in same line item. It can get blurred and lead to mistakes as well.


  4. Michael Le

    Thanks for the article, Ben. I’ve enjoyed your podcasts as well as your articles, both on BP and your own site.
    My question is in regards to the rules of thumb. I generally see 5% of revenue listed, at least for SFHs. Are those numbers not even useful at all because they’re too misleading or are they at least a starting point?

    • Ben Leybovich

      Michael – you hit it on the head? A furnace replacement in a $600/month costs the same as it does in an $2,400/month rental, but represents as a % totally differently. This difference has nothing to do with replacement cost, and everything to do with income, which distorts the point beyond usefulness.

      These are real $$ costs, and should be represented as dollars. You can back into % if you like, but you shouldn’t start there. Makes sense?

      • Michael Le

        Thanks, Ben.
        So would it possibly make sense, as a quick short cut perhaps, to have rules of thumbs in tiers? So a Class C property that rents around $500-1000, a furnace replacement would represent a higher ratio of the revenue so maybe CapEx should be more along 10%. And a Class B property where rent is $100-1500 is should be 8%. But a Class A property that is renting above $2000 would be 5%?
        How do you decide to even start the underwriting process at all on a property that hits your mailbox? I’m sure it’s a long, involved process so how do you decide it’s even worth it to dig deeper?

  5. Justin R.

    Ben –

    I assume you have (or will) change what you claim as depreciable vs maintenance expenses with the new Tangible Property Expensing IRS rules. Are you planning to also change what you budget for your CapEx and Maintenance line items to match? With a cursory look at my historical expenses, I’m guessing this change would halve my CapEx expenses (and increase current maintenance). Haven’t sat down with the numbers just yet.

  6. Mike Dymski

    Take each building component, estimate it’s replacement cost and remaining life and you have a better forecast than a rule of thumb. It’s more art than science but more science than general rules. Scale helps remove some of the variability in estimates versus actual results.

  7. Andy Krzanowsky

    Thanks for sharing. Would love to hear your expanded thoughts on cap ex beyond a simple roof. 250/dr each year should be very easy for an investor who has planned and invested wisely.

    I think many people are overly optimistic about the lifespan of these items. Thus the expense arrives much sooner than they anticipated and results in what should have been a larger acquisition for monthly cap ex. These optimistic people could get into big trouble if they aren’t purchasing truly cash flowing properties after expenses. Your approach of addressing many of those items up front is very smart. You’ve helped control the unknown/surprises. Thanks for the reminder for the importance of building reserves.

  8. Vincent Prunier

    So if I’m reading this correctly, based on your logic, if you had to replace that same roof after 2 years your cap ex per unit now jumps to $1,250/door, just for the roof?? Can’t say I’ve ever heard of anyone underwriting a deal that way before. Why not simply account for the amortized portion of the useful life of the roof in the acquisition cost?

  9. Rachel Luoto

    Thanks for the article!
    I’m curious, does your Cap Ex number on the buy then depend on when you sell? It seems like if I know the roof has 15 years but I’m doing a 1031 sooner than that, then there would be no need to calculate that item in Cap Ex.

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