Capital expenditures—commonly known as CapEx—are a fundamental part of doing business, no matter the industry. From tech giants like Google investing billions in data centers and AI infrastructure to multifamily operators upgrading roofs and HVAC systems, CapEx represents a company’s commitment to long-term performance and value creation.
What Is CapEx?
In simplest terms, CapEx refers to major investments made to acquire, improve, or extend the life of assets. These are not routine expenses; they’re strategic outlays designed to enhance productivity, efficiency, or value.
- For a technology company, that might mean new servers or software platforms.
- For a manufacturer, it’s machinery or automation systems.
- For a property management organization, it’s everything from roofs to full-unit renovations.
While operating expenses (OpEx) keep things running day to day, capital expenditures are about positioning for the future.
CapEx in Property Management
Within real estate, CapEx takes on a very tangible form—it’s what keeps a property competitive, safe, and desirable over time. Unlike minor repairs that maintain existing function, CapEx projects significantly extend an asset’s life or increase its value.
Common examples include:
- Building Systems: Roof replacements, HVAC systems, electrical upgrades, and plumbing overhauls—core investments that preserve operational integrity.
- Interior Enhancements: Kitchen and bath renovations or upgraded windows that boost appeal and justify higher rents.
- Exterior & Infrastructure: Parking lot resurfacing, major landscaping, or foundation repairs that protect against deterioration.
Why CapEx Planning Matters
Effective CapEx planning balances financial discipline with strategic foresight. Setting aside reserves—typically 1–2% of a property’s value annually, more for older assets—helps ensure funding is available when major systems reach the end of their life cycle.
Rather than relying on percentages alone, the best approach is proactive forecasting. Track the age and expected lifespan of each major component. Knowing your 18-year-old roof might need replacement in 7-years allows for smart financial preparation—not last-minute scrambling.
CapEx vs. Operating Expenses
Understanding the difference between CapEx and OpEx isn’t just accounting—it’s strategic.
- Operating Expenses (OpEx): Day-to-day costs that maintain current functionality and are fully deductible in the same year (e.g., repairs, cleaning, minor maintenance).
- Capital Expenditures (CapEx): Investments that improve or extend asset life. These are depreciated over time but increase the property’s cost basis, potentially reducing future capital gains tax.
The Bigger Picture
Whether you’re running a global tech company or managing a multifamily portfolio, capital expenditures are a signal of investment confidence. They reflect an organization’s belief in its own growth and longevity.
In property management, well-planned CapEx ensures:
- Higher resident satisfaction and retention
- Reduced emergency repair costs
- Sustained property value and competitive positioning
- Stronger long-term returns for ownership
CapEx isn’t a burden—it’s an investment in the future. When approached with intention, discipline, and foresight, these expenditures transform from one-time costs into enduring value drivers.
Monica Jeter is the Vice President for California Residential Property Management at Lewis. A seasoned veteran, she brings 20+ years of experience from well-regarded industry names like the Irvine Company. When not promoting operational excellence, Monica enjoys quality family time with her toddler.