Property Management
What is a 'capital expenditure' (CapEx) reserve in property management?
AEmergency funds kept for immediate maintenance needs
BFunds set aside for major long-term improvements or replacements (roof, HVAC, major systems) that are not routine operating expenses✓ Correct
CFunds required by Illinois law for all rental properties
DOperating capital maintained in the trust account
Explanation
Capital expenditures are major long-term improvements or replacements that extend a property's useful life or add value—such as new roofs, HVAC systems, elevators, or parking lot resurfacing. Unlike routine maintenance (operating expenses), CapEx is capitalized.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Math Concepts
State-Specific Concepts
Trust Account Rules
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