Help Analyzing Capital Expense

[Christopher R.]

Let me first say how blessed I feel with the Bigger Pockets forum. I mean everyone has been so helpful and generous with sharing their knowledge. I am just learning so much as a newbie to real estate investing!

I am finally getting a better handle of real estate analysis. Based on the excellent article Introduction to Real Estate Investment Deal Analysis by J Scott, I was able to set up my own spreadsheet.

One thing I still don't have a good handle on is how to analyze Capital Expenses (CapEx). So I hope you can walk me through possible the possible capital expenses of a property so I can learn how to do it. Can you show me how you would do the CapEx for this property?

Property: Cherry Field Drive

Sq Ft: 1750

Year Built: 2000

Features

• Attic
• Cable Ready
• Ceiling Fan
• Flooring: Carpet, Hardwood, Linoleum / Vinyl, Tile
• Parking: Garage - Attached, 2 spaces, 72 sqft
• Patio
• Porch
• Security System
• Sprinkler System

Appliances Included

• Dishwasher
• Dryer
• Garbage disposal
• Microwave
• Range / Oven
• Refrigerator

Room Types

• Dining room

Construction

• Exterior material: Vinyl
• Roof type: Other
• Room count: 8
• # Stories: 2.0
• Structure type: Other
• Unit count: 1

Other

• Floor size: 1,750 sqft
• Last remodel year: 2000
• Laundry: In Unit

I saw the house a few days ago and it was really well taken care of. It was newly painted. The floor looks nice. The carpet looks new. The dishwasher and fridge looks decent. Even the lawn did not have much weeds and was tell tended.

[J Scott]

Here are the most common capital expenses associated with the rental properties I've owned:

-  Roof Replacement

-  HVAC Replacement

-  Hot Water Heater Replacement

-  Replace All Windows

-  Replace Appliances

-  Replace Flooring

If I were to try to determine the cost of capital expenses for a rental, I would use that list and assign a life span and replacement cost to each item based on the specifics of the property.

For example, it might look like this:

-  Roof - Every 20 Years - $5000

-  HVAC - Every 20 Years - $5000

-  Hot Water Heater - Every 8 Years - $800

-  Windows - Every 20 Years - $5000

-  Appliances - Every 10 Years - $2000

-  Flooring - Every 5 Years - $2000

So, for that particular property, every 20 years I would spend about $29,000.  That averages to about $1500/year over those 20 years, or about $125/month.

You can now add $125/month to your list of costs for this particular unit.

Now, there are longer-term expenses as well that are very infrequent -- new siding, upgrading electrical, upgrading plumbing, etc.  So, you want to round up and say $150/month to be safe.