Capex wipes out cash flow for a year?

[Bill Ward]

So long question short, my rental property averages about $150 a month cash flow after regular maintenance expenses and minor repairs. But for a capex expense, my next one being a bath tub replacement or replacing the carpet with LVP. Is it normal that a minor $3k expense such as those would wipe out my year's worth of cash flow, and leave me in the red on paper? Justified by the fact it's not a normal yearly expense, Or does my rental just suck? Mortgage PITI is $900, rent is $1300. Mortgage is high as it's year 4 of a 15 year mortgage.

Thanks,

Bill

[Greg M.]

Why are you looking at the whole cost as an expense this year? The bath tub may cost $3,000 to replace, but it's going to last 30 years. Mentally viewing it as a $3,000 cost this year and having zero free cash flow this year is the mistake. If it lasts 30 years, then it costs $100 a year. You should be applying a $100 cost of this item to each year. 

Big expenses happen. So it wiped out your FCF for a year. BFD. You need to spread that cost over the life of the improvement. You also need to recognize that it added value to the property. 

And a 15 year mortgage is not a mistake. The mistake is that many people on these forums think everyone has the same goals as them and should invest like them. I find the idea of having a small number of fully paid off, high cash flowing properties vastly more appealing than having a lot of highly leveraged properties that cash flow a little each. To me, one is a retirement plan and the other is a job.