- The property may be required to add reserves for replacement or capital improvements expenses above the cash flow line.
- The owner’s accountant usually makes the determination of the how to handle the capital improvements expenses in regards to BTCF. Some lenders, however, require that an amount be expensed above the NOI for routine replacements (e.g., carpets and appliances). The definition of what is a capital expense may vary according to the owner’s goals and the accounting practice for the property. When large payouts of capital expenses are being planned over a multiyear period, a line here may capture expenses incurred.