InvestingAll terms starting with C
CapEx (Capital expenditures)
Also called: capital expenditures, capital reserve
Large, infrequent replacements (roof, HVAC, water heater), budgeted monthly even though they are paid rarely.
CapEx covers components with a long life and a large replacement cost. They are not monthly expenses, but they are entirely predictable in aggregate, which is why owners reserve for them monthly.
A property with no CapEx reserve is not more profitable; it is deferring a known bill. The roof’s age tells you roughly when it arrives.
Related terms
- Operating expensesThe recurring costs of running a property: taxes, insurance, management, maintenance, and owner-paid utilities.
- Cash flowWhat remains each month after rent has covered operating expenses and debt service.
- NOI (Net Operating Income)Income after operating expenses but before debt service, taxes on income, and capital expenditures.
- Maintenance reserveMoney set aside monthly for routine repairs, so ordinary problems do not become cash-flow emergencies.
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