Hey guys, here’s a list of potential operating expense items that you can use as a guide when looking at properties -
Vacancy & Collection Loss (not technically an operating expense)
Taxes
Insurance
Utilities
Management Fees
Leasing Fees
Maintenance
Allowance for Structural Reserves (short lived components)
Snow/Leaf Removal
Landscaping
Pest Control
Trash Removal
Window washing
Janitorial
Fire/Alarm Security
Elevator Maintenance
Advertising Costs
Legal Fees
Mileage
Business Supplies
Only taxes and insurance are considered to be fixed expenses. Some of these expenses only apply to multi-tenant office or retail buildings. Sometimes owners pay for a separate management company and leasing company, so they’re not always under the same roof.
My largest expense on my buildings is the mortgage. Second is water since the tenants pay the gas/electric. Third is regular maintenance like clogged toilets, leaky sinks, etc.
This is a good list. Remember, an operating expense list is comprised of the expenditures necessary to “operate” the property annually – in other words, it’s a list of recurring expenses.
A mortgage payment or annual debt service is not a recurring annual expense necessary to operate the property. Imagine owning a property with no debt. Your annual operating expenses don’t change. You still have cut the grass, plow the now, pay the real estate taxes, keep the lights on, etc.