Capital Expenditure Reserve
Calculator
Results
- Annual capital reserve
- 3,600
- Monthly capital reserve
- 300
- Capital reserve per unit per year
- 90
- Capital reserve (% of property value)
- 0.112499
Property management results
| Annual capital reserve | 3,600 |
| Monthly capital reserve | 300 |
| Capital reserve per unit per year | 90 |
| Capital reserve (% of property value) | 0.112499 |
formula-map diagram
- Annual capital reserve
- 3,600
- Monthly capital reserve
- 300
- Capital reserve per unit per year
- 90
- Capital reserve (% of property value)
- 0.112499
Property management relationship
Formula
Annual capital reserve = replacement cost ÷ useful life in years= 3600
Note
This is a simplified model: it applies the standard property-management definition to the numbers you entered. Rent affordability uses a flat share-of-income rule and ignores credit history, local screening criteria and household size. Proration assumes a plain daily rate; your lease or local law may prescribe a different convention (for example a fixed 30-day month). Security-deposit interest is simple interest at the rate you enter, while many jurisdictions set the rate, the compounding and the payout schedule by statute. Income, expense, reserve and escalation figures are straight-line and assume the amounts you enter hold steady; they ignore taxes, depreciation, financing changes, capital events, inflation and market turnover. Lease buyout compares the contractual penalty with the remaining rent only and is not a reading of your lease. These results are general information, not legal, tax or investment advice: check your lease and local tenancy law and consult a qualified professional before acting.
More in Property management
See all →Frequently asked questions
What qualifies as a capital expenditure versus a regular operating expense?+
A capital expenditure replaces or substantially extends the life of a major building system or component — roof, HVAC, siding, parking lot, elevators — and is typically capitalized and depreciated rather than expensed in the year it's paid. Routine repairs that keep existing systems running belong in operating expenses or the maintenance reserve instead.
How is the capex reserve amount typically calculated?+
A common method is to estimate the replacement cost of each major component, divide by its remaining useful life to get an annual cost, and sum across all components — this is sometimes called the component or reserve-study method. A simpler proforma shortcut sets aside a fixed amount per unit per year (often $250-$500+ depending on building age) or a percentage of gross income (commonly 5-10%).
Why do lenders often require a capex reserve to be funded into an escrow account?+
Lenders want assurance that money for major replacements actually exists when a roof or boiler fails, rather than depending on the owner's discretion or general cash flow at that moment. A funded reserve account also protects the collateral value of the property that secures the loan.
Does the capex reserve get subtracted before or after calculating NOI?+
Under standard appraisal convention, NOI is calculated before the capex reserve — the reserve is a below-the-line deduction applied afterward to arrive at cash flow available for debt service and distributions. Some lenders instead require it above the line for underwriting purposes, so always confirm which convention a given analysis uses.
How should the capex reserve change over a property's holding period?+
As a building ages, more of its major systems approach the end of their useful life simultaneously, so a reserve that was adequate at acquisition can understate real capex needs 10-15 years later. A reserve study should be refreshed periodically rather than carried forward unchanged for the life of the investment.