All Forum Posts by: James Rohrbach

@James Rohrbach First you have to understand what CAPEX is. These are your larger expenses to upgrade/repair the property such as: roof, HVAC/furnace, siding, windows, plumbing, electrical, etc. If this 5-unit is one building why would your CAPEX need to be per door? You have 1 roof, 1 HVAC/furnace (maybe), 1 property to replace siding.

The answer is 5%. The next question is... is 5% appropriate? You have to factor in the age of the building and the age of all CAPEX items I listed above. Your agent, property manager or contractor can help answer that question.

The capex as a percentage is not per door, it is per total gross revenue. So if your rent per unit is say $1000, then your total monthly gross rent is $5,000 and your capex per month for reserves should be 5% of $5,000. The next question should be, is 5% enough for this particular investment. The best way to answer that is to put into a spreadsheet all capex items, list their existing age, their total life span, their remaining life span and the cost to replace. Then add them all up and see how much you need to put away each year to replace each item based on the lifespan vs remaining lifespan. This will give you an exact dollar amount per year. You can then do the math to see what percentage of your gross income that comes out to.