Operating expenses are costs incurred while running a property on a day to day basis. They include things like property taxes, insurance, and maintenance. Capital expenses are longer term in nature and they should be considered an investment. For example, a capital expense could be an investment in a new roof.
What are capital expenditures on a rental?
A Capital Expenditure, also known as CapEx, is something that you purchase or upgrade that increases the value of your rental property. A Capital Expenditure can thereby be considered an asset and can affect your taxes based on the depreciation rules of the Federal Tax Code.
What is the difference between a capital expense and an operating expense?
Capital Expenditures are, in the context of commercial real estate, funds used by a company to acquire or upgrade physical assets that cannot be expensed as a current operating expense for tax purposes.
Is CapEx part of operating expenses real estate?
Examples of CapEx include physical assets, such as buildings, equipment, machinery, and vehicles. Examples of OpEx include employee salaries, rent, utilities, and property taxes.