Rental Property - CAPEX & Cashflow
hey guys, quick question
when calculating the cash flow or the COC % on a rental property, how does budgeting for CAPEX get factored in?
say i know in 5 years ill have to do the roof and it's going to cost me 15k, i need to budget 3k annually for it
the money isnt really an expense though as it's not being spent, but i am however losing cash outflow so it must affect the cash flow somehow?
as far as i know COC % = NOI - DEBT / TOTAL CASH INVESTMENT
where in this formula would the budgeting for capital expenditures get factored in?
thanks!!!
Most Popular Reply
Capital reserves get taken out as well. Some people include this above NOI, others below. But it's a lender requirement, so you'll need to account for it in your cash flow calculations.