Window Dressing in Broker Packages: The Capitalization Shell Game Everyone talks about how lender reserves are outdated—$250 to $300 per unit, unchanged for decades. But that’s not the real trick. Let’s focus on the quieter hustle: how expenses get capitalized to dress up NOI. Some groups use a blanket policy: anything over $1,000? Capitalize it. That’s fine if it’s consistent and disclosed. But usually, it’s not. Here’s how the game works: • The T-12 stops at NOI. • Then you get a vague “Capital Expenditures – $X” line. • No itemization. No story. Just one clean number that hides a lot of mess. I’ve seen $35,000 in plumbing repairs buried below the line. If it’s a one-off, maybe that flies. But if it shows up every quarter? That’s not capital. That’s a chronic issue being swept under the rug. And here’s where it gets worse—some groups fund CapEx from renovation budgets and quietly move it to the balance sheet. And no one sees the balance sheet in a broker package. That’s where the real window dressing happens. What to do instead: • Ask for detailed capital expenses—month by month, not just year-to-date. • Ask for work order reports going back at least two years. It’s hard to hide the disconnect between work orders and the T-12 when you have both side by side. • Cross-check Google reviews. If residents are complaining about no water or flooded units, there should be a plumbing cost somewhere. If not, someone’s playing games. Also—stop trusting the broker’s R&M line. Use your own. You know what a 1980s asset with mediocre maintenance really costs to operate. Base it on: • Age of the property • Date and depth of the last rehab • Quality of the onsite team • Your experience with similar sites And always err high. Better to be pleasantly surprised than painfully wrong. One $35K plumbing bill? A fluke. Four in a year? A systemic problem. If it’s all capitalized without disclosure? That’s not accounting. That’s camouflage. More to come on window dressing in sales packages. Let me know if you like these types of post. I will do more of them.