Property Management
What is a 'capitalization reserve' (capital expenditure reserve) in Delaware property management?
AA tax reserve set aside for capital gains on future sale
BFunds set aside from operating income to replace major building systems and components over time✓ Correct
CA reserve account required by the lender for property improvements
DA capital fund for purchasing additional properties
Explanation
A capital expenditure (capex) reserve is money set aside each year from property income to fund future replacement of major components (roof, HVAC, parking lot) that have limited useful lives. Adequate reserves reduce financial shock when large repairs are needed.
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