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Talked to a lender about a 5-unit deal and they brought up something I hadn't considered
Honestly, I was looking at a small apartment building in Columbus, around $850k. I was talking to a local bank lender about the loan, and he asked me point blank, 'What's your plan when the HVAC system goes in year 8?' Tbh, I had just penciled in the usual 3% for capex. He said on older properties like that, he's seen guys get burned by not having a separate, fully-funded reserve for big-ticket items from day one, not just a percentage. It hit different because he wasn't just checking a box, he was talking from seeing deals fall apart. Made me go back and re-run my whole pro forma. How do you all model for specific big repairs versus a general capex line?
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violafox4d ago
Yeah, that's a solid point from your lender. I started listing out each major system's age and expected life, then built a sinking fund line item for each one. It makes the cash flow picture way more real than a flat percentage ever did.
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