Capital Expenditure Puns

Multifamily real estate investing is a business. You deploy capital into properties, and you reap income.

But not every apartment property is producing as much income as it could be.

For this reason, real estate investors budget capital expenditure (“CapEx”) dollars to improve the property, in the hopes of increased income.

>You must spend money to make money — Plautus, 184 BC

I’m not really sure who Plautus is and if he’s the first person to utter the famous “spend money to make money” moniker, but it needs some qualification. It’s really not a surefire thing to spend money to make money in multifamily. Just spending dollars on a property doesn’t guarantee that you’ll be paid back in time via increased operating income. For instance, you can spend money on a new amenity that isn’t valuable to your tenant base, or redesign an apartment in a way that isn’t any more attractive than the old design.

Good investors know that spending money wisely helps make money. Knowing what types of upgrades you can deploy into a given property in order to increase the income and, therefore, the value of the property, is how you win on this real life monopoly board. The best CapEx projects have the highest Return on Investment (“ROI”) because they produce more income on less dollars invested.

You can think of a construction project as one large CapEx project. Building a building where one did not yet exist, and successfully producing income from it at a favorable return, is the ultimate CapEx project. At that point, you’ve earned more than the title of multifamily real estate investor… you’re now a real estate developer.

But you don’t need to become a full-blown real estate developer to understand CapEx. When you own a property that’s already built, there are four plausible reasons to budget capital expenditures:

1. Raise occupancy
2. Raise rents
3. Increase tenant retention
4. Change property use

CapEx to Increase Occupancy

Vacancy is the very first killer of income that you’ll find on a property’s income statement. When you see vacancy on a property, your next question should be: Why?

After all, someone built that space with the idea that a tenant would pay to occupy it.

While there are many potential reasons for vacancy in a property, several of them hint that CapEx may be required to solve it. Those reasons include:

• Old property — if a property was built a long time ago, it might be time for renovation or rehab in order to attract new tenan

Hello, I'm having trouble in calculating Net Capital Expenditures. Damodaran says on his book you have to substract depreciation from capital expenditures, and I'm trying to replicate the example he gaves on MMM (in 2007) but the result I obtain doesn't match with the presented in the book. Do you know how to calculate this metric?

Hi, I've just been inducted as an Intern at a major restructuring firm involved in insolvency and recovery. I'd like to learn more about Capital Expenditure and the economics behind huge expenditures, depreciation and how one must derive highest benefit out of them before I can take on any major projects. I'd be truly obliged if you could suggest textbooks on the same. Thank You.

For example: I pay my entire annual car insurance bill in March. When I view my monthly expenditure for March, it shows a bump compared with February. But the bump is expected, and not something I should be concerned about.

I would love it if there were some way to force Personal Capital to treat that annual expenditure as if it were spread out in twelve equal payments over a 12-month period. That would avoid the misleading impression that I was spending extravagantly in one particular month.

The same principle could apply to income, for example a tax refund.

Thanks!

hello,

anyone know?

I have a vague idea bit not 100% certain.

From what i understand (and i'll use a fictitious example here):

Farmer buys a trailer for £20,000

£20,000 is deducted from tax liability

Capital allowance is also allowed and spread over 5 years, so, for the next 5 years, taxable amount is reduced by £4,000/year (or all claimed within year one, so £40,000 is written off)

idk if i'm completely confused so would appreciate some light shed on the matter, ta.

Hi I'm starting to learn about discount valuations and I have some questions, my latest one is what is the difference between "capital expenditure" and "change in working capital", I've search it on the internet but is not clear =(.

Also Cash Flow to the Firm is

CFF = EBIT - TAXES - capital expenditure - change in working capital

or

CFF = EBIT - TAXES - capital expenditure

Thanks beforehand.

Hi guys I'm pretty new to valuation. I was working with valuing a company but now I'm kind of stuck. I want to connect my growth rate with R&D and capex but there's seems to be no correct way to do this. If I take the reinvested amount for the current year/ earnings it generates next year we are assuming that R&D expires in a single year which is not true. So how can we do this?

TAIPEI — In 2021, the world’s biggest chip foundry TSMC expects to invest between $25 billion and $28 billion in capex, compared with $17.2 billion last year. Out of this year’s budget, the company will allocate about 80% for its advanced process technologies, including 3nm ($15 billion), 5nm and 7nm. About 10% will go to advanced packaging and mask-making and the remaining 10%, for specialty technologies. TSMC said the capital investment is aimed at higher growth opportunities underpinned by multi-year megatrends. Starting from 2021, high-performance computing (HPC) will become a new growth driver coming from big customers in a variety of market segments, according to the company. Another factor driving confidence is that 5nm demand is stronger than expected.

https://www.eetimes.com/tsmc-boosts-capital-expenditure-budget-on-strong-outlook/

https://www.digitimes.com/news/a20210115PD207.html

1. DTA
2. DTL

Trying to wrap head around this but not able to understand... thanks!