🏠 (Part 3) Lessons I have learned from owning & managing residential & commercial properties:There is not much you can do with some one time costs, but focus on recurring expenses & how you can either eliminate them perhaps through a one time large expenditure or reduce them.

A very simplistic answer is its a 2000 furnace Payment$1950 is principle on the furnace$50 is InterestDate                      Account Title                      Debit            Credit12/2/2014             Cash                                                       $ 200012/2/2014            Liability Furnace Loan         $195012/2/2014            Expense- Interest                 $  50                                                                                              $2000           $2000Also the Furnace expenditure should increase the cost basis of the property for valuations and cost accounting and profit/loss metrics

In other words, the cap rate you bought the property with should be lower than the cap rate you sold it with.However, if the market your property is located in has a turn for the better, it will be sold at a lower compressed cap rate in the actual future, in which case you reap the reward of extra return without taking any additional risk.Factor #4: Capital Expenditure (“CapEx”) ReservesCapital or replacement reserves is the money set aside for one time improvements to the property (such as replacing roofs, fixing HVAC systems, etc).

Setting aside for capital expenditures? 

COC ROI: 21.8%CAP RATE: 11.3%GRM: 61%I used conservative estimates: 5% capital expenditures, maintenance and vacancy.

I personally would avoid them because you have less control (because of HOA), but that could also be seen as an asset because you have fewer capital expenditures to worry about. 

Few landlords will sell profitable, cash-flowing units unless they are seriously hard up for cash (and the property has appreciated considerably) or the properties are about to need a boatload of repairs and capital expenditures.

Secondly, at that price point, many of the capital expenditures items should be at the beginning of its life otherwise you are paying to much for the building; which in your example is the case.

Every bit of rent, security deposit, and expenditure goes through the business account.

There are houses that I sold 3 years ago, which if I was in my current position I would have held onto...but at the time needed to turn and burn to build up capital, as we didn't have the track record or portfolio to borrow any more money from banks and had tapped the private money we had sourced to that point.As was mentioned on a relatively recent BP podcast, the 2% rule is no longer (with the exceptions of war zones...And so when you allow for capital expenditures and vacancy, you will probably NET the same return and a solid 1% built since 2000).Finally @Ryan Jones, while 1% deals are definitely still out there, they are getting significantly harder to find.