What goes into calculating the CapEx in a deal analysis?

[Peter Korty]

Hi BP Community,

I'm a total newbie to real estate investment game and I've been analyzing a few deals. My question is, what do you all including as a CapEx in your deal analysis?

CapEx should include everything that has a lifespan right? So for example, according to Google, a dishwasher has a lifespan of about 10 years, a garbage disposal is about 8 years, and an air conditioner is about 12 years.

Sticking with the dishwasher example from above, at my local big box store, the mid range model of dishwasher is about $600 dollars. So $600/10 years/12 months = $5 per month of CapEx for the dishwasher. I did this with everything in my personal residence that has a lifespan and came up with about $150 per month of CapEx.

Since I'm totally new to this, I conservatively estimate that I can get $600 per month in rent, so 25% of my rent is a CapEx. When I entered this into the BP buy and hold calculator, it actually gave me a warning that it should be a percentage of the monthly rent instead of the monthly amount.

What are your thoughts? Does this sound about right?

Thanks for the help,

Pete

[Justin V.]

@Peter Korty

Hi peter,

You definitely have the premise, but don’t forget labor/installation.

I mostly have 120 year old 1600-2000 sqft duplexes and figure my cap ex at between $300 and $350 per month. I think I started with a calc I found on here and adjusted for my market as I had to pay for some of these repairs. Assuming a property is similar to what I’m used to I’ll just plug my $325 in or adjust accordingly.

Also I know this was just part of the example, but I don’t put disposals in my rentals because I’ve heard a few horror stories about what can be sent down them by tenants (aquarium gravel and boot mud were my favorites).

Best of luck and to your success!

-Justin