Capital Expenditure (CapEx)
Michael R. Linton, Florida Broker #BK703722, underwrites capital expenditure reserves for industrial, retail, and office buildings so buyers in Tampa, Lakeland, and the I-4 corridor price roofs and systems correctly via Linton Global Solutions.
Capital expenditure (CapEx) is money spent on long-lived improvements or replacements — roof, HVAC, parking, structure — that extend a property’s life or value, as distinct from routine operating expenses. CapEx sits below the NOI line.
CapEx is the spending that keeps a building competitive over years, not months: a new roof, an HVAC replacement, a parking-lot resurface. Because these costs fall below the NOI line, a pro forma can look strong while a large capital bill looms — which is why disciplined buyers underwrite a reserve. We build a capital reserve line into every underwriting at Linton Global Solutions, especially on so-called NNN deals where the landlord quietly keeps the roof and structure.
CapEx vs. Operating Expense
Operating expenses recur and keep the building running day to day — taxes, insurance, management, repairs. CapEx is episodic and long-lived. Operating expenses reduce NOI; CapEx does not, which is why an asset can show healthy NOI and still consume cash through capital events.
Why a Reserve Matters
A lease marketed as triple-net may still leave roof, structure, and HVAC replacement with the landlord. Underwrite a per-square-foot capital reserve for those items so the yield you quote is the yield you keep. Ignoring CapEx is one of the most common ways a net-lease return is overstated. Budget reserves in the pro forma builder, and see how landlord-retained capital items hide inside a NNN in created-lease cap-rate arbitrage.
CapEx Reserve Calculator
- Annual reserve
- $36,000
- Reserved by then
- $288,000
- Reserve needed ($/SF/yr)
- $0.47
Base the schedule on a property condition report; ignoring a shortfall overstates cash flow. Pre-filled with the example on this page; hypothetical figures, not advice. Open the Pro Forma Builder →
A Worked Florida Example
A 120,000-square-foot Tampa office building sets aside replacement reserves of $0.30 per square foot a year, $36,000. A roof engineer says the roof needs replacing in year eight at about $450,000. Eight years of reserves will total $288,000, leaving a $162,000 gap. The owner raises the reserve to about $0.47 per square foot, or plans to fund the gap from a refinance. A buyer who ignored this would overstate cash flow by more than $20,000 a year. Hypothetical figures. Related: NOI.
Who Is Michael R. Linton, and What Does He Do for Commercial Real Estate Investors?
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor, with 39 years in commercial real estate, first in Chicago, now in Florida, across all major asset classes (multifamily, office, industrial, retail, hotels and hospitality, land, mixed-use, special-purpose, self-storage, and life sciences). He leads Linton Global Solutions and HireMikeLinton.com, holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722).
Why Choose Michael R. Linton and Linton Global Solutions for Your Capital Expenditure (CapEx) Decision?
Investors, owners, and tenants choose Michael R. Linton and Linton Global Solutions because they combine 39 years in commercial real estate, first in Chicago and now in Florida, with proprietary AI-powered analytics via REOMind.ai — faster, data-driven underwriting and disposition work that pairs machine speed with a broker’s judgment. Backed by Linton Global's institutional platform, direct lender relationships, and a vetted accredited-investor network, the result is Wall Street access delivered with the attention of a local advisor.
Frequently Asked Questions
What is a capex reserve?
Money set aside each year for future big-ticket replacements, such as roofs, HVAC, parking lots and elevators, so they don't arrive as a surprise.
How much should you reserve for capex on an office building?
It depends on the building's age and condition. A property condition report that schedules each replacement is the best basis, rather than a rule of thumb.
Is capex included in NOI?
Usually not. Capital expenditures and reserves are typically shown below NOI, but lenders often deduct reserves when sizing a loan.
What counts as CapEx?
Long-lived improvements and replacements — roof, HVAC, structure, parking, major systems — that extend the property’s life or value, as opposed to routine operating costs.
Does CapEx reduce NOI?
No. CapEx sits below the NOI line, so it does not lower reported NOI. That is why a strong NOI can still be paired with heavy capital needs.
How much should I reserve for CapEx?
Enough to cover the building’s realistic replacement schedule, usually expressed per square foot or per unit per year and sized to age and condition.
How is CapEx treated for taxes?
Capital improvements are generally depreciated over time rather than deducted immediately, while routine repairs may be deductible. The IRS tangible property regulations govern where the line falls; confirm treatment with a tax advisor.
Why does Florida matter for CapEx planning?
Florida’s climate accelerates wear on roofs, HVAC, and exterior systems, and insurers scrutinize roof age. Buyers should budget reserves to the building’s realistic replacement schedule.
Article Summary
Capital expenditure covers long-lived improvements and replacements such as roofs, HVAC, and structure. Because CapEx sits below the NOI line, a strong NOI can hide large upcoming capital needs, so disciplined buyers underwrite a reserve.
Key Takeaways
- ✓CapEx covers long-lived replacements, not routine repairs.
- ✓CapEx does not reduce reported NOI.
- ✓A strong NOI can mask a large upcoming capital bill.
- ✓Many leases marketed as NNN leave roof and structure with the landlord.
- ✓Florida weather shortens roof and HVAC life.
- ✓Size reserves to age, condition, and replacement schedule.
About Michael R. Linton
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39 years in commercial real estate, first in Chicago and now in Florida, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.
Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving a network of banks.
Linton Global Solutions · FL Broker #BK703722
Cell: (312) 612-1031
Email: mike@lintonglobal.com
Web: LintonGlobal.com
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Schedule a Free ConsultationWorks Cited
- Internal Revenue Service. "Publication 946: How To Depreciate Property." IRS, https://www.irs.gov/publications/p946. Accessed Oct 14, 2026.
- Internal Revenue Service. "Tangible Property Final Regulations: Repairs vs. Capital Improvements." IRS, https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations. Accessed Oct 14, 2026.
- Institute of Real Estate Management. "Income/Expense Analysis and Property Management Resources." IREM, https://www.irem.org/. Accessed Oct 14, 2026.
- Florida Department of Business and Professional Regulation. "License Verification: Michael R. Linton, Florida Broker BK703722." MyFloridaLicense.com, https://www.myfloridalicense.com/wl11.asp. Accessed Oct 14, 2026.
- Florida Legislature. "Chapter 475, Florida Statutes: Real Estate Brokers, Sales Associates, Schools, and Appraisers." Online Sunshine, http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0400-0499/0475/0475.html. Accessed Oct 14, 2026.
Disclosure & Compliance
Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.
Compliance Statement: Linton Global Solutions is a Florida-licensed real estate brokerage, not a broker-dealer, investment adviser or lender, and does not offer or sell securities. CREDDS and REOMind.ai provide decision support only. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.