You're analyzing a 1952 brick duplex and a 1994 ranch-style rental. Both cash flow about the same on paper. But one of them is going to eat your profits over the next five years, and it's probably not the one you think.
Most investors use the same CapEx percentage for every property. That's a mistake. A 70-year-old house and a 30-year-old house have completely different capital expenditure profiles, and underwriting them the same way means you're either leaving money on the table or walking into a cash flow trap.
What CapEx Reserve Actually Means
Capital expenditures are the big-ticket items that wear out over time: roofs, HVAC systems, water heaters, appliances, flooring. These aren't repairs you can patch. They're full replacements that hit all at once.
The standard advice is to reserve 5-10% of gross rent for CapEx. That's fine as a starting point, but it ignores the most important variable: where each component sits in its lifespan.
A 1990s property with original systems is approaching replacement age on almost everything. A 1950s property might have already cycled through those replacements twice. Or it might still have the original cast iron pipes slowly corroding in the walls.
Why Property Age Creates Different Risk Profiles
1950s Properties: The Good and Bad
Houses built in the 1950s share common characteristics:
The risk with 1950s properties isn't that everything will fail at once. It's hidden problems: knob-and-tube wiring behind plaster, clay sewer lines with root intrusion, or lead paint remediation.
1990s Properties: The Timing Problem
A house built in 1994 is now 30+ years old. Here's why that matters:
| Component | Typical Lifespan | 1994 Status |
|---|---|---|
| Asphalt roof | 20-25 years | Likely replaced or needs it |
| HVAC system | 15-20 years | On second unit or overdue |
| Water heater | 10-12 years | On third unit |
| Original windows | 25-30 years | Seals failing |
| Vinyl siding | 30-40 years | Approaching replacement |
The 1990s were also the era of builder-grade everything. Hollow-core doors, laminate counters, thin carpet padding. These properties were built efficiently, not durably.
I've seen 1990s rentals where the roof, HVAC, and water heater all need replacement within the same two-year window. That's $15,000-$25,000 hitting at once if you haven't reserved for it.
Component-by-Component Breakdown
According to the [National Association of Home Builders' study on home component life expectancy](https://optimalhomeinspections.com/resources/standards/life-expectancy-of-home-components/), here's how long major systems last:
Roofing
Many 1950s homes have slate or tile roofs that will outlast you. A 1990s home likely has 3-tab asphalt that's near end of life.
Cost to replace: $8,000-$15,000 for a standard single-family roof.
HVAC Systems
1950s homes often had radiator heat or gravity furnaces, many of which have been replaced with modern forced-air systems in the 1990s or 2000s. Check the install date on the data plate.
1990s homes are likely on their second HVAC system, or the original unit is living on borrowed time.
Cost to replace: $5,000-$12,000 depending on system type and regional labor costs.
Plumbing
This is where 1950s properties get risky:
If you're buying a 1950s property with original galvanized supply lines, budget for a full repipe. That's $4,000-$10,000 depending on house size and accessibility.
Electrical
1950s homes often have:
1990s homes typically have adequate 150-200 amp service with modern breaker panels. This is one area where newer is genuinely better.
Panel upgrade cost: $2,000-$4,000
Windows
Original 1950s windows are likely single-pane wood frames. If they're still original, they're either charmingly drafty or already replaced.
1990s vinyl windows are approaching the end of their functional life. Seal failure is common, causing fogging between panes.
Cost to replace: $300-$700 per window, or $5,000-$15,000 for a whole house.
Calculating Your Actual CapEx Reserve
Forget the percentage method. Here's how I actually underwrite CapEx:
> Annual CapEx Reserve = Sum of (Replacement Cost ÷ Remaining Lifespan) for each major component
This gives you a number based on what you'll actually need to replace and when.
Worked Example: 1955 Duplex
Property: 2,400 sq ft duplex, $185,000 purchase price, $2,200/month gross rent
| Component | Replacement Cost | Age/Condition | Years Left | Annual Reserve |
|---|---|---|---|---|
| Roof (replaced 2015) | $12,000 | 10 years old | 12 | $1,000 |
| Furnace (replaced 2018) | $6,000 | 7 years old | 10 | $600 |
| Water heater (2021) | $1,200 | 4 years old | 8 | $150 |
| Windows (original wood) | $8,000 | 70 years old | 0-5 | $1,600 |
| Plumbing (copper, original) | $0 | Good condition | 20+ | $0 |
| Electrical (upgraded 2010) | $0 | Modern panel | 30+ | $0 |
Total Annual CapEx Reserve: $3,350/year ($279/month)
That's 15% of gross rent, above the typical 10% rule. But the windows are the wild card. If they hold another 10 years, you can reduce that reserve. If they need replacing next year, you're underfunded.
Worked Example: 1994 Ranch
Property: 1,600 sq ft 3BR/2BA, $195,000 purchase price, $1,800/month gross rent
| Component | Replacement Cost | Age/Condition | Years Left | Annual Reserve |
|---|---|---|---|---|
| Roof (original) | $10,000 | 31 years old | 0 | Immediate |
| HVAC (replaced 2015) | $7,500 | 10 years old | 7 | $1,071 |
| Water heater (2020) | $1,000 | 5 years old | 7 | $143 |
| Windows (original) | $7,000 | 31 years old | 0-5 | $1,400 |
| Flooring (carpet) | $4,000 | Unknown | 3-5 | $1,000 |
| Appliances | $3,000 | Various | 5 | $600 |
Total Annual CapEx Reserve: $4,214/year ($351/month), plus immediate roof replacement
That's 23% of gross rent before factoring in the roof that needs to go on immediately. This property looks like it cash flows on paper, but you're buying a CapEx bomb.
The Deferred Maintenance Trap
Sellers know about looming CapEx. That's often why they're selling.
When I see a 1990s property with below-market pricing, I immediately ask: what's about to break? Usually it's the roof, the HVAC, or both.
On 1950s properties, deferred maintenance shows up as:
Get a thorough inspection. Not the standard $400 home inspection, but a full specialist review if you see warning signs.
My Rules for CapEx by Property Age
After underwriting several dozen deals across different property ages, here's what I've landed on:
Pre-1960 properties (verified updated):
Pre-1960 properties (original systems):
1990s properties (well-maintained):
1990s properties (original everything):
What Inspectors Miss
Standard home inspections check if things work today. They don't tell you:
For 1950s properties, I recommend a sewer scope ($150-$300) and an electrical inspection if the panel looks old.
For 1990s properties, I want to see maintenance records. A furnace with annual tune-ups since 2010 is different than one that's been ignored for two decades.
Negotiating Based on CapEx Reality
Once you've calculated actual CapEx needs, you have leverage.
1994 ranch needing a roof? That's $10,000 off the purchase price, minimum. Or ask the seller to replace it before closing.
1955 duplex with galvanized pipes? Factor the repipe cost into your offer. "The property needs a $7,000 repipe within 2 years. My offer reflects that."
Most sellers expect some negotiation on big-ticket items. The ones who won't budge are often priced too high for the property's true condition.
Running Your Own Numbers
The math isn't complicated, but it requires knowing the actual condition of what you're buying. Before you offer on any rental property:
A property that cash flows $300/month but needs $400/month in CapEx reserves isn't a deal. It's a liability.
Our [single-family rental calculator](/tools/single-family) includes a CapEx reserve input so you can see how different reserve levels affect your actual returns. Run the numbers with realistic CapEx, not the optimistic 5% that makes every deal look good.