If OP elects de minimis safe harbor ("DMSH"), he's going to have to capitalize as the expenditure is going to be more than $2,500.If OP forgoes the DMSH and instead applies the Betterment, Adaptation, and Restoration tests ("BAR tests") under the tangible property regs, we'd almost certainly have a betterment and/or restoration of the HVAC subsystem on our hands, so we'd also capitalize under this option.OP may be able to use the safe harbor for small taxpayers ("SHST") to expense the costs, however not enough information was given by OP.If SHST is off the table due to limitation, then must capitalize. 

Unless there is something I have blinders to and I'm not seeing.Here's my write up:Deal Analysis:MLS: 1091507Purchase Price: $75,000Loan Amount = $52,500Down (30%) = $22,500Closing Costs = $3,500Cash-to-close: $26,000P&I at 4.0% = $250.64RE Tax = $56.92HOI = $30Total PITIA = $337.56Rent = $1,000Expenses:PITIA = $337.56Property Manager = $100Capital Expenditures = $100Vacancy = $50Utilities = $100Operating Expenses = $687.56NOI = $1,000 - $687.56 = $312.44NOI (50% Rule) = $1,000 - $837.56 = $162.44837.56 = 337.56 + 0.5(1000)Cash-on-cash = 3,749.28/26,000 = 0.1442Cash-on-cash (50% Rule) = 1,949.28/26,000 = 0.07497*******************************Renovation Analysis:Post-Rehab value est = $100,000Purchase Price: $75,000Loan Amount = $60,000Down (20%) = $15,000Rehab/Reno (10% PP) = $7,500Closing Costs = $3,900Cash-to-close: $26,400P&I at 4.0% = $286.45RE Tax = $56.92HOI = $30Total PITIA = $373.37Post-Rehab rent = $1,300Expenses:PITIA = $373.37Property Manager = $100Capital Expenditures = $100Vacancy = $50Utilities = $100Operating Expenses = $723.37NOI = $1,300 - $727.37 = $527.63NOI (50% Rule) = $1,300 - $1,023.37 = $267.631,023.37 = 373.37 + 0.5(1300)Cash-on-cash = 6,331.56/26,400 = 0.2398Cash-on-cash (50% Rule) = 3,211.56/26,400 = 0.12165

Mechanicals were updated in the last 7 years so no, I did not add a capital expenditure reserve.

(Repairs and Maintenance, Vacancy, Capital Expenditures, Management Fees, Electricity, Gas, Water and Sewer, HOA Fees, Garbage)Thank you again team for the help, and I hope to maybe one day work with you.Luis Ramirez.

That leaves you $2,750 for insurance, property taxes, repairs/maintenance, and capital expenditures.

Expenses: Loan - 950Insurance - 175Vacancies - 90 ( 5% ) Capital Expenditures - 90 (5%)Repairs - 90 (5%)Total - 1,400Income - Bottom Unit : $1000Top: 700-800Possibility to make it into a triplex and collect another 500-800 down the road. 

Your expenses would be Maintenance, Cap Expenditures, Insurance, Taxes, Vacancy Reserves.

Once you move out, if rent stays the same, you'll be cash flowing somewhere around $500 a month, minus capital expenditures, vacancy etc. you'll probably be sitting at $2-300 a month in real cashflow.

Bring your crew and gain some equity and enjoy no/little capital expenditures for years to come.

Optimized this should bring over 1800 a month with very minimal capital expenditure.