If it’s an older property or has deferred maintenance, you might want to lean toward the higher end.When it comes to CapEx (capital expenditures), planning for major replacements like roofs, HVAC systems, and appliances is key.

Without this, it’s tough to calculate a realistic cash-on-cash return or DSCR (Debt Service Coverage Ratio).Condition of the Property: Are there any deferred maintenance or capital expenditures needed in the short term?

So, the borrower would probably need to begin with the expenditure of a $10,000 retainer for counsel, followed by another $10,000 after initial depositions .

To scale successfully you have to get past the point where your newly increased expenditures exceed your increased revenue; past the point where your ROI allows you to “break even” on your investment, and past the point where the ROI is worth the increased risk, the increased aggravation, time, and “lifestyle” change, and past the point where you can step back from “operations” and concentrate on management.  

Just remember to factor in management fees, vacancy rates, maintenance, and capital expenditures, as these can really impact your cash flow.

However, this strategy doesn’t eliminate the need to budget for repairs and capital expenditures (CapEx).You’re right that without cash flow, unexpected expenses like emergencies or major repairs can be risky.

I maintain even break even on valuation (which is rare in SF Zoned areas), the ADU has big disadvantages versus new property acquisition including financing, level of effort, rent control, prop tax being based on cost rather than value added, length of time including length of time from first expenditures to first income, reduction of something from existing unit (in your case existing home lost its garage).Did you see starting next year Mf can add an ADU per unit up to 8 units without any affordable housing concessions?

The numbers you see in pro formas or calculators often don't account for hidden costs like:-Major repairs and capital expenditures (roofs, HVAC, plumbing, etc.)

Are there more capital expenditures coming?

The issue in most instances is the inability to articulate the risks and how these structures will actually help and therein lies the issue and why most go over the top on asset protection expenditures.