Calculating NOI/Cap Rate with Expense Cut off

[Victor Zhu]

Hi Everyone,

When you are calculating your NOI, when it comes to the expense portion of the calculation, do you perpetually include Cap Ex., Repair & Maintenance and Vacancy in the calculation for the life of the property?

Or do you set up a cut off, for example you end up accumulating $10K from expenses mention above, and you stop including these expenses in your NOI calculation until you have to dip into the $10K reserve you built up. This is assuming you do not have some major disaster(natural or human caused) occur in the next few years.

Just curious in how everyone manages their expense reserves, does it end up accumulating in a high yield savings account? [Maybe you saved up 10K - 20K for the expenses without any major repairs(however unlikely it may be...)]. 

I understand that everyone's situation is different but I'd love to hear what action you guys take.

Thank you,

Victor