What is a Capital Expenditure (CapEx)?
Capital Expenditures are payments for work and services done on a properties that are capitalized onto a properties balance sheet rather than deducted as an expense on a P&L.
These are the investments that you make into a property to maintain or expand the day-to-day business operations. As a result, they grow your basis on your property.
Examples of CapEx work for commercial real estate:
- Installing a new roof
- Replacing doors
- Installing new carpet
- Buying new equipment such as secruity cameras, lighting or even locks
- Furnishing an apartment for short term rentals
CapEx vs. OpEx
Operating expenses are the ongoing costs you must pay for your property to be maintained. Consider CapEx to be more one-off expenses and an invesment into the property.
| CapEx | OpEx |
| Lawn Mower | Landscaping |
| New Promotional Sign | Newspaper Ad to Lease |
| Roof | Property Manager |
Does equipment count as CapEx?
Yes, new machinery or even corporate vehicles can be categorized under CapEx.
Is CapEx Tax Deductible?
No, Capital expenditures are not tax-deductible as an expense on the P&L.
However, like other assets, you are able to depreciate your Capital Expendentures on a depreciation schedule that matches the useful life of the assets.
