Posted over 6 years ago

Cap Ex Assumptions and Rule of Thumb & Chart of Life

Capital Expenses (Cap Ex) are the large items that are not repairs or maintenance. For example roof, water heater, HVAC, flooring, paint, cabinets, landscaping, windows, etc. Here are three ways to calculate it:

1) Just use 1 months rent (this was what my unsophisticated 1st Property Manager said)

2) Use 10-15% of income

3) Spend a few minutes and build your own spreadsheet with general Life Cycle estimates shown below (I think this is a bit waste of time but I proves the concept and allows you to learn and do your own sensitivity analysis):

Normal 1459552951 Screenshot

Normal 1459553379 Screenshot

More at my blog!

Comments (3)

  1. Its art to it however at least here is the science behind it.

  2. Thanks for putting this together, really fantastic format and resource that any landlord can customize for their costs and properties. Being able to quickly calculate prorated costs by item makes it simple to adjust your reserves for each property individually.

    1. Jason I rewrote this on my new blog