"Cash Flow" is a misnomer

[Jonathan G.]

I thought about an alternative title for this post such as "You're in over your head and don't even know it".  

This post is directed at newbies or "newer" landlords or "accidental" landlords.  I classify myself in the latter.  Essentially, this post is to bring focus and attention to Capital Expenses.  Its one the biggest things I have personally learned on BP. 

Essentially, if you are only breaking even on your current mortgage and rental payments, you are actually going into a financial hole and not even realizing it. Capital expenditures should not be confused with your routine maintenance / repair cost but rather an expense simply related to things wearing out and needed replacement. These are certainties and not possibilities. If you're in this for the long term and are not accounting for eventual replacement of the roof, HVAC, plumbing, paint, floors, carpet, hot water heater,appliances, foundation/framing, landscaping etc, etc, etc, SURPRISE, this things will wear out.  That 27.5 year deduction is not extra money but rather what you eventually going to be spending on replacing things. 

Thanks BiggerPockets for driving this point home to me and lets all try not to allow ourselves to falsely believe we are "cash flowing" on the monthly numbers.