As a real estate investor in Austin, are you prepared to meet any large operating costs to properly maintain your investment for the long-term? Today’s blog post will examine the area of capital reserves for investment properties and how to proactively fund them.
First, some basics: Capital reserves are used for capital expenditures. Capital expenditures or capital expenses are defined as funds spent to upgrade or materially improve a property. Typically, these are one-time major purchases. Capital expenditures are much different from routine operating expenses or routine maintenance and repairs. For tax purposes, a capital expenditure must be depreciated over the useful life of the asset (talk to your CPA for specifics). A routine operating expense will be entirely deducted in the tax year it is incurred.
Replacing an enti ... Link to full article