LP payout/distribution question

[Charlotte Dunford]

Assuming I'm paying my LP's monthly, the gross income is $30,000 per month, CapEx of $20,000 came out of the operating reserves which LP's funded. Other expenses including insurance, repairs & Maintenance costed $5000. When it comes to distribution time, do I pay $30,000-$20,000-$5000=$5,000 OR $30,000-$5000= $25,000 since the $20,000 came out of the operating reserves fund?

[Bruce Petersen]

@Charlotte Dunford

I am distributing profit from operating cash flow and am funding the rehab capex projects out of the dollars you raised from LPs prior to close so it doesn't effect the distribution. I would distribute the 25k if that itself is an accurate number (only you know that). If it is, you next need to ensure you have ample operating reserves before sending money back to the partners.

One thing to keep in mind, if your lender is making you escrow replacement reserves you have to account for that as well so if your monthly RR escrow payment to the lender is 5k then you should deduct that from your distribution as well. It's money you still have but is restricted until you complete a capex project that the lender approves of before they will return you escrowed funds.