What is considered a capital expenditure (CapEx)?

Capital expenditures (CapEx) refer to large-scale expenditures that a property owner makes in order to improve the value of the property, extend its useful life, or adapt it to a different use. This often includes major repairs, renovations, or upgrades that enhance the overall condition or functionality of a property.

In this context, choosing major repairs or renovations to improve property value accurately reflects the definition of CapEx. Such expenditures lead to a significant improvement that directly contributes to the long-term value and operational efficiency of the property. The intent behind these expenditures is not just to maintain the status quo but to invest in the property for future returns.

In comparison, monthly maintenance costs, utility expenses, and cosmetic changes typically do not meet the criteria for capital expenditures. Monthly maintenance costs are regular operating expenses aimed at maintaining the property in its current state. Utility expenses also represent ongoing operational costs rather than investments. Cosmetic changes, while they can enhance aesthetics, generally do not add significant value or longevity to the property in the same way as substantial renovations or repairs would.