What comes first? Cap Ex before the NOI or after?

[Ayodeji Kuponiyi]

Hey BP Nation! I shared another deal I'm underwriting and came across the issue of Cap Ex with some BP members. I included the Cap in my 55% of the expenses and apparently I was wrong for this that. I was told the following:

Gross Income - Expenses = NOI

NOI - P&I - Capex Reserves = Net Cash Flow

The problem is how do I account for Cap Ex in percentage in my initial underwriting? I assumed I could just deduct anything the inspector/inspection reports bring up from the agreed purchase price, Am i off?

[Michael Noto]

@Ayodeji Kuponiyi If your offer is 100k or more below asking just make them the offer and see if you get a counter. Then if they aggressively counter you can look deeper into the numbers and tell them the max you can offer. 

To do all of this upfront work and thinking and then to have the owners either not counter or counter at 5k below ask is a serious waste of your time. 

Once you make your initial offer you will see where they are. Let it take place naturally from there.