Setting Aside Funds For Cap-ex, Repair, Vacancy, etc.
Hey BP,
So I know we were taught to make sure we account for cap ex, repairs, and vacancy at a monthly rate when analyzing deals.
My question is, why don’t we just make sure we keep a healthy cash reserve to be ahead of the game just in case repairs are needed to be made as soon as we purchase? In a perfect world, we could set aside funds monthly and not have any big repairs for 5 years or so. But, you and I both know that, that may never happen and you’d better be prepared for something big to come up. I get it when analyzing to minimize risk and make sure a deal cash flows, but I feel like that may really get someone crunched if not prepared.