Capital reserve in or out of expenses?

When doing a valuation on a park, I seem to be off on the numbers when I add in the capital reserve.

As I am already calculating repairs at $100 a lot. When I add in the capital at 5% the numbers don’t work out.

Do you keep the capital reserve, as part of the expense ratio? Or is this just for budgeting.

I am looking at a park with 22 paying lots at $225 a month. Water is submetered, however I get a 46% expense ratio when I have the capital reserve included in expenses.

We do not budget for a ‘capital reserve’ line item. I think you are double-counting. That said, if there are significant deferred maintenance issues, you need to reduce the purchase price of the MHP for those items.