Major repairs like a roof or HVAC replacement don’t happen every year, but funding a reserve steadily avoids a large repair becoming a cash-flow emergency when it does happen.
How it works
Monthly rent, annualized, multiplied by a chosen reserve percentage, gives the annual CapEx reserve — divided by 12 for the monthly amount to set aside.
What this does not include
This uses a flat percentage-of-rent estimate rather than a detailed itemized reserve study (estimating each major system’s remaining useful life and replacement cost individually) — a more precise approach for an older property nearing several major replacements at once.
How to use this calculator
- Enter monthly rent and a CapEx reserve rate.
Frequently asked questions
What’s a typical CapEx reserve percentage?
Often cited in the 5%-10% of rent range, though the right number depends heavily on the property’s age and condition — an older property generally warrants a higher reserve rate.
Is this the same as the 50% rule’s estimated expenses?
No — the 50% rule estimates broad operating expenses (taxes, insurance, routine maintenance); this reserve is specifically for major, infrequent capital expenditures on top of that.
Where should the reserve funds actually be kept?
Many investors keep CapEx reserves in a separate, readily accessible account specifically to avoid the temptation to spend those funds on other things before a major repair is needed.
