What Is CapEx Reserve?
A CapEx reserve is money set aside from rental income to cover eventual big-ticket replacements — roof, HVAC, water heater — that don't happen every year but are certain to happen eventually.
Why It Matters
Skipping a CapEx reserve makes a property's cash flow look better than it really is; a common rule of thumb sets aside 5-10% of rental income for future capital items.