In the context of property management, what is meant by capital improvements?

Capital improvements refer to enhancements made to a property that significantly increase its value or extend its useful life. These improvements often involve substantial investment and typically include renovations, additions, or major upgrades that elevate the overall quality of the property. For example, installing a new roof, upgrading HVAC systems, or adding a new wing to a building all fall under capital improvements as they contribute to the long-term value of the asset.

While maintenance and repairs are crucial for property management, they are classified separately, as they do not necessarily enhance property value but rather ensure that the existing structures remain functional and safe. Upgrades aimed at reducing environmental impact can be a part of capital improvements, but they specifically focus on sustainability and may not always correlate directly with an increase in property value. Changes made for compliance with city regulations often arise after the fact; while they can be necessary for legal operation, they do not inherently increase value in the same way capital improvements do.