CapEx in NOI analysis?

• A. Not included in NOI; capitalized and deducted from cash flow separately
• B. Subtracted from NOI
• C. Added to NOI
• D. Treated as revenue

Answer: (A)

CapEx is not included in NOI because NOI measures the property’s operating performance, focusing on income and operating expenses related to running the property. CapEx represents long-term investments that improve or extend the life of the asset, so it is capitalized on the balance sheet rather than treated as an ongoing operating expense.

The cash you spend on CapEx reduces cash flow, but it does not reduce NOI in the period it’s paid. Instead, CapEx is depreciated over time for tax and accounting purposes. In many analyses, you’ll see NOI separated from CapEx to arrive at a cash flow figure after capital expenditures.

So the best answer is that CapEx is not included in NOI; it’s capitalized and deducted from cash flow separately.