My cost to operate using their current expenditures (which I have intentions to reduce) would be at $400,000 conservatively. 

Hi Jane,When you replace a roof, it typically counts as a capital expenditure (CapEx), which means it must be depreciated over time rather than deducted in full in the year you incur the expense.

While a percentage set aside for repairs and maintenance doesn’t mean you’ll necessarily have enough stashed away for this expense it would certainly lessen the blow of the expenditure.

The issue with doing this method is it takes more money up front for the renovations, you are buying older properties which may have more needed capital expenditures, and it takes more time and energy.

Without actually running numbers, you'll probably need to get closer to 600k to break even from a cash flow perspective (this all assumes 20% down).As others have said, you aren't considering saving for capital expenditures or vacancy and the maintenance is far below what I would budget.

But, as others have said, cash flow in this environment is tough and for new investors, they can be baited into cash flow now which means more difficult tenants, lower C to D areas, and expectant capital expenditures.

Some of the main reasons are that operating expenses, acquisition costs, and capital expenditures take a substantial amount of any would-be profits.

Capital Expenditures (10-15% of Income)Rule of Thumb: Reserve 10-15% of your income for capital expenditures (CapEx) like roof replacement, HVAC systems, or major renovations.Why: Regularly contributing to a CapEx fund ensures you have the cash on hand for significant improvements or replacements, preserving the value of your properties.5.

The expenditures occur long before any income.  

This is really extreme for such a tight time frame... and cost us about $45,000 in capital expenditures.