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Updated almost 8 years ago on . Most recent reply

Cori Chekhovskiy's profile image
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Cori Chekhovskiy
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  • from Traverse City, Michigan
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Cori Chekhovskiy's profile image
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Cori Chekhovskiy
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  • from Traverse City, Michigan
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Cori Chekhovskiy
  • Investor
  • Traverse City, MI
4
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Buying & Selling Real Estate

Does Cap Rate include Capex?

Cori Chekhovskiy
  • Investor
  • Traverse City, MI
Posted

Just want to check my understanding. When people discuss Cap Rates, I think it subtracts off for all cash expenses EXCEPT Capex. Is that right? Is there a measure that subtracts off for Capex?

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Roy N.
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  • from Fredericton, New Brunswick
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Roy N.
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Roy N.
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  • Fredericton, New Brunswick
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Roy N.
  • Rental Property Investor
  • Fredericton, New Brunswick
ModeratorReplied

@Cori Chekhovskiy

CAPEx is not an expense.  It is a reinvestment of capital.

It is often acquired by setting aside a portion of retained earnings in a reserve.  However, it could just as easily be acquired through a contribution of new capital by stakeholders (shareowners).

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