What are Capital Expenditures defined as?

Capital Expenditures, often referred to as CapEx, are defined as improvements that extend a property's useful life. This type of expenditure includes significant investments made to enhance the value of a property or to improve its functionality beyond mere maintenance. Examples of capital expenditures can include major renovations, roof replacements, or the installation of new systems such as heating, ventilation, and air conditioning (HVAC).

These expenditures are distinct because they typically do not occur regularly like routine maintenance or operational expenses, which are associated with the day-to-day running of a property. Instead, capital expenditures are often planned for long-term benefits, enhancing the property's value and making it more marketable or appealing to tenants.

Recognizing capital expenditures is crucial for property management as it directly impacts financial budgets, investment strategies, and tax considerations. This understanding aids property managers in making informed decisions about property maintenance and enhancement while considering the overall financial health of their investment.