Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
General Real Estate Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 7 years ago on . Most recent reply

User Stats

27
Posts
5
Votes
Adam Allard
  • Flipper/Rehabber
  • Glen Burnie, MD
5
Votes |
27
Posts

Why is CapEx not a part of operating expenses?

Adam Allard
  • Flipper/Rehabber
  • Glen Burnie, MD
Posted

I'm reading an article, Top 21 Real Estate Investing Terms and Returns with Formulas, on some basic terminology. The author goes over what operating expenses are and lists examples, and everything seems normal expect that he explicitly states that CapEx should not be included in operating expenses. Why is this?

His definition is that operating expenses "include those costs associated with keeping a property operational and in service." The way I see it, buying a new roof for a property is definitely a cost that's required to keep the property operational and in service, and thus should be calculated into your operating expenses. 

Can anyone shed some light onto why you shouldn't add CapEx into your operating expenses? Since this deals more in the bookkeeping realm, am I safe to imagine that these rules are pretty black and white when it comes to accounting (I admittingly slacked off my 2 semesters of accounting, regretting it now).

Most Popular Reply

User Stats

9
Posts
4
Votes
Kevin Terpening
  • Real Estate Investor
  • Minneapolis, MN
4
Votes |
9
Posts
Kevin Terpening
  • Real Estate Investor
  • Minneapolis, MN
Replied

Your monthly "allowance" for CapEx isn't an actual expense until you spend it.

Even when you do spend it, as @Jon Deavers mentioned, you can often depreciate the cost instead of expense it. Which route you go is up to you on the tax treatment. Expense will only impact this year's taxes; depreciate (can) increase the basis and impacts multiple years.

Loading replies...