Operating Expenses in Multifamily Investment
Operating expenses refer to the ongoing costs associated with the management, maintenance, and operation of a multifamily property. These expenses are necessary for the property’s day-to-day functioning and are subtracted from the rental inco...
Repair and Maintenance
Repair and maintenance expenses cover the costs of fixing or maintaining common property issues. This includes repairs to appliances, plumbing (e.g., toilets), lighting, and other small-scale maintenance tasks.
Note that major capital expend...
Contract Services
Contract services include essential, recurring services that support property operations. These can involve external providers for services such as snow removal, pest control, internet installation, and janitorial work. These are typically hand...
Landscaping and Grounds Maintenance
Landscaping and grounds maintenance expenses are typically ongoing costs related to maintaining the exterior of the property. This includes mowing, trimming, seasonal clean-up, and potentially snow removal. Since these tasks are usually contrac...
Utilities
Utility expenses are a major component of operating costs for multifamily properties. These costs cover essential services such as electricity, water, gas, and trash removal. Common utility expenses include:
Electricity
Powering common area...
Property Management Fee
The property management fee is paid to the property management company for overseeing the day-to-day operations of the property, including leasing, rent collection, and property maintenance. This fee is typically calculated as a percentage of t...
Insurance
Insurance premiums are an essential expense for multifamily properties, providing coverage against potential risks and liabilities. Insurance protects property owners and management from financial losses due to events like natural disasters, ac...
Real Estate Taxes
Real estate taxes (property taxes) are levied by local governments on land and buildings. These taxes are typically the largest operating expense for multifamily properties and contribute to funding essential public services such as education, ...