Updated almost 10 years ago on . Most recent reply
Cap Ex Breakout
Hi All,
I understand that it's extremely important to take capital expenditures into account when doing the numbers for a rental property. However, I've been looking at several properties where they haven't had anything that would be conisdered "cap ex" expenses in the few years of expenses that they give me. I'm assuming that I should consider this as they haven't been saving up for things like a new roof, new furnace etc, but I'm not sure how exactly to go about taking account of that.
I guess the first question I have is what all is considered to go into the "cap ex" category of expenses. Roof, water heater, furnace, AC, kitchen remodel? Am I missing anything?
The second question I have is how to best to budget for what I know is deferred cap ex spending - save up a higher amount from the rental income to play directly for it, or try to decrease the purchase price by some sort of amortized amount of the expected repair cost of the roof.
I hope those questions make sense and look forward to some feedback. Thanks in advance!