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Capital Expenses Need Capital Reserves

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