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ProCash, an Economic Model for Income Properties

Capital Replacement

Capital replacement expenditures can be estimated as a percentage of debt free income or as a specific periodic schedule. The model also allows for cash flow to be applied to reserves for capital improvements. These reserves earn interest until cash expenditures are made. Depreciation schedules are set up from these cash expenditures, and if cash expenditures exceed available reserves, an additional charge to cash flow is made.

There are two easy ways to input a reserve for capital replacement. The user may determine a dollar amount to be imposed in each period, or a decimal which the system will multiply by "net available for debt service" in each period to determine the capital replacement expenditure. In either case, the input is most easily made to AVI[60]. A value greater than or equal to .6 will be taken as a dollar amount; a value less than .6 will be taken as a decimal to be applied to debt free income.

Defining the input array CAPREP in the same way will have exactly the same impact. CAPREP offers additional features. It can be a vector to impose separate estimates of capital replacement expenditures year by year (or whatever the period definition is by MV[19] ). For periods after those provided for in CAPREP, AVI[60] is used as a decimal to be applied to "net available for debt service" to estimate the later periods. If AVI[60] is not used, then the later periods are projected at the same level of expenditure input as the last element of CAPREP.

If AVI[60] is defined not equal to zero, then it will be taken as a decimal for projecting capital replacement after the years provided for in CAPREP. If AVI[60] is zero (the default value), then a percentage will be determined from the years input through CAPREP divided by the debt free income in the total of those years.

MV[6] is used to show interest earned on unspent funds in the capital replacement reserve.

inputdescriptionhelp#importancefrequency
AVI[60]Capital replacement (decimal of DFI or $/unit/yr) 336  4
AVI[136]Rate to Earn Interest on Reserve for Capital Improvements 336  2
CAPREP Input:Capital replacement expenditures or reserves 336  1

viewtypecase studyviewfile sizecomplexityhelp#comment
InputsWindsong Housing Associates : LIHTC(capital replacement) 3445 40 336 
BHP II Limited Partnership : LIHTC(capital replacement) 3673 55 336 
OutputsDemo Mixed Use Facility(capital replacement) 3502 100 336 
601 Liberty St. (office)(capital replacement) 4179 144 336 
Belle Glade 72 Units Deal A(capital replacement) 4353 203 336 
Turnkey Syndication : LIHTC(capital replacement) 5499 273 336 
Conv. 9% FAHP 3% 25 Years: 13 Areas (housing)(capital replacement) 5487 273 336 
Tower Point Apartments (demo)(capital replacement) 5381 273 336 
Tower Point Apartments (detail)(capital replacement) 5344 273 336 
Windsong Housing Associates : LIHTC(capital replacement) 5655 318 336 
BHP II Limited Partnership : LIHTC(capital replacement) 5821 375 336 
Shopping Center Illustration(capital replacement) 6208 400 336 

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