CAP Rates & Replacement Reserves

[Account Closed]

I was wondering if anyone factors Replacement Reserves (i.e. potential future CAPEX repairs) into their CAP Rates when doing a property analysis? As many of you know a CAP rate is Net Operating income (NOI) / Purchase Price. I've noticed some people include Replacement Reserves below NOI when calculating cash flow and some put it above the line. This creates some variation in the CAP rate. The same could be said about property management. This article helps explain the variation, but what is the correct way?

http://www.ccim.com/cire-magazine/articles/323788/...

Thanks,

Josh