The Apartment Capital Plan: Planning Capex and Drawing From Replacement Reserves
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A capital plan lists every major replacement an apartment building will need over the hold, such as roofs, HVAC systems, water heaters, parking lots, windows and unit interiors, with the expected year and cost of each. It starts from the property condition report done at purchase, is funded from the deal's own reserves and the lender's replacement reserve, and is updated every year. Spending from a lender-held replacement reserve needs a draw request: the borrower pays or commits to the work, then sends invoices, proof of completion and often lien waivers, and the lender reimburses from the reserve after its review.
This post is part of our guide to real estate syndication. It covers planning and paying for capital work after closing; for sizing reserves at purchase, see syndication reserves. Practices are as of November 2026 and vary by lender.
What goes in the plan
| Item | Typical source of the estimate | What to record |
|---|---|---|
| Roofs | Property condition report, roofer inspection | Age, remaining life, replacement year, cost |
| HVAC and water heaters | PCR, maintenance records | Count, ages, failure rate |
| Parking lots and paving | PCR | Sealcoat and replacement cycles |
| Exterior paint, siding, windows | PCR | Condition, cycle |
| Plumbing and electrical | PCR, sewer camera, electrician | Known issues, priority |
| Unit interiors | Business plan, turn records | Units done, units left, cost per unit |
| Life safety and accessibility | PCR, local requirements | Deadlines |
Keep the plan as a table by year for the whole hold, with totals per year next to the reserve balances. See the lender's third-party reports and repairs vs capital improvements.
Which reserves pay for what?
- Replacement reserve (lender-held). Many agency loans require monthly deposits into a reserve for replacements; the borrower draws on it under the loan's rules.
- Renovation holdback or capex holdback. For value-add loans, funds held back at closing and released in draws as work is completed. See renovation draw schedules.
- The deal's own capital reserve. Money raised from investors and kept in the deal's account for planned work and surprises.
How a reserve draw usually works
- Check what is eligible under the loan documents: which items, minimum draw amounts, how often.
- Do the work (or sign the contract), and pay the contractor if the lender reimburses rather than pays directly.
- Assemble the request: the lender's form, invoices, proof of payment, photos, and lien waivers where required.
- Inspection: some lenders inspect larger items before releasing funds.
- Reimbursement: the servicer releases funds to the borrower's account after review.
Draws can take weeks, so keep enough cash in the deal's account to pay contractors in the meantime. Ask the servicer for its checklist before the first draw.
How the plan affects investors
Capital spending not covered by reserves comes out of cash flow, which can lower distributions. A plan that shows a big year ahead lets you hold back cash early instead of surprising investors later. Report capital work and reserve balances in the quarterly update. See the quarterly investor report template and the annual budget and reforecast.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units from their friends and followers, and runs the investor side after closing: quarterly distributions from the deal's bank account, investor updates and K-1 delivery. The deal's accountant prepares the K-1s; DoorRaise delivers them. DoorRaise also forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals. Investors fund by wire into escrow at Enterprise Bank & Trust. For the books, sponsors can add the optional Property Books & Taxes service: one monthly price for the deal, from $250 a month, for full-charge bookkeeping (1099s and prior-year cleanup are not included, and any extra work is quoted first and done only after the sponsor approves it). DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.
Plan the reserves you need to raise with the free raise planner.
FAQ
What is a capital expenditure plan for an apartment building?
A schedule of major replacements and improvements over the hold, with the expected year and cost of each, based on the property condition report and updated yearly.
What is a replacement reserve?
Money set aside, often in a lender-held account funded by monthly deposits, to pay for replacing major building components.
How do I draw from a lender's replacement reserve?
Follow the loan's draw procedure: complete or contract the eligible work, submit the lender's form with invoices, proof of payment and lien waivers, allow for any inspection, and receive reimbursement.
How long do reserve draws take?
It varies by servicer, from days to several weeks. Plan to pay contractors from the deal's own cash in the meantime.
Does capital spending reduce distributions?
It can, if it is not covered by reserves set aside for it. A capital plan helps you hold back cash early instead of cutting distributions later.
Sources
- Fannie Mae Multifamily Selling and Servicing Guide
- Freddie Mac Multifamily Seller/Servicer Guide
- IRS Publication 946, How To Depreciate Property
This article is general information, not legal, tax or investment advice. Loan terms vary; the loan documents decide. DoorRaise is not a property manager, lender, law firm, broker-dealer, investment adviser or funding portal.