Fixed Asset

A fixed asset is long-term, tangible property a business uses to produce income, such as land, buildings and equipment. A rental building is a fixed asset. Its cost is capitalized and depreciated over time rather than charged against income in the year it is bought.

Spending that adds a new fixed asset or extends one's life, such as a roof or a furnace, is a capital expenditure. It stays out of NOI as a one-time cost. NOI instead carries a replacement reserve, $2,280 a year on the default house, to account for those costs over time.

Land is a fixed asset that is never depreciated, since it does not wear out. The building and its parts are depreciated, which is why a purchase price has to be split between land and building for tax purposes.