replacement reserve

Dictionary of Business Terms for: replacement reserve
replacement reserve

amount set aside from net operating income to pay for the eventual wearing out of short-lived assets; sometimes used by a homeowners’association.

Dictionary of Real Estate Terms for: replacement reserve
replacement reserve

an amount set aside from Net Operating Income to pay for the eventual wearing out of short-lived assets.

Example:Singer buys new apartments, each containing $3,000 worth of carpeting and appliances that have a 10-year useful life. Each year she deposits $300 in a replacement reserve account to pay for recarpeting and new appliances in 10 years.

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