Structural reserve in real estate

A "structural reserve" is used by a financial institution or an investor when underwriting investment real estate, and is used as a reserve for major structural items on the building. For example, the building will not need a new roof every year, but more realistically every 15 - 20 years. Using a structural reserve allows you to spread those types of costs out over the long term. A prudent real estate investor will take this structural reserve and stash it away to cover these major costs.