Capital expenditures are larger, longer-lived investments in a property — roofs, HVAC, unit renovations, parking — as opposed to routine operating expenses. CapEx is excluded from net operating income but is very real cash, so it must be budgeted and reserved for.
A value-add plan is largely a CapEx plan: targeted renovations that raise rents and value. Because CapEx sits below NOI, a deal can look healthy on NOI yet still need significant capital — which is why reserves and a realistic CapEx budget matter.
See how EagleCap structures multifamily investments for passive investors.
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