In Practice
Capital expenditures, or CapEx, are big-ticket projects that last years rather than months. Think roofs, parking lot resurfacing, new HVAC systems, exterior paint, siding, appliance packages across many units and full interior renovations. They are tracked separately from the monthly cost of running the property, so they do not reduce net operating income.
On the ground, you will see CapEx in the annual capital plan and the monthly capital report. The owner approves projects, you coordinate bids, vendors and resident notices, and the spending is tracked against the approved amount. Many companies use a cost threshold, for example any single item or project over a set dollar amount, to decide what counts as capital. Your company's accounting policy decides the line.
An example: replacing the carpet in one unit during a turn is usually a repair or make-ready cost. Replacing the carpet in 80 units as a planned project to extend the life of the building is typically capital. Same material, different category, because of scale and useful life.
A common mistake is coding a capital project as a repair to make the monthly numbers look better, or the reverse. Mixing the two makes reporting unreliable and can cause friction with the owner and lender. When you are not sure, ask your regional manager or accountant before the invoice is coded.
Not to Be Confused With
OpEx is the recurring cost of running the property. CapEx is a larger, one-off project that adds value or extends the life of a building component.
Capital Expenditures: Common Questions
What is the difference between CapEx and OpEx?
OpEx covers the recurring costs of running the property, like payroll, utilities and repairs. CapEx covers major projects that last for years and are tracked separately.
Does CapEx affect NOI?
No. Net operating income is calculated before capital spending, which is why owners track CapEx on its own line.
