What are operating expenses?

Operating expenses refer specifically to the costs incurred through the regular operation and management of a real estate asset. These expenses include maintenance, utilities, property management fees, insurance, and other day-to-day costs necessary for the upkeep and functioning of the property. Understanding operating expenses is crucial for investors and property managers as they directly impact the profitability and financial performance of an asset.

Initial investment costs associated with purchasing a property encompass a different category of expenses, typically related to acquisition, rather than ongoing operational costs. Similarly, fees linked to the sale of a property and taxes imposed on property owners both fall outside the realm of operating expenses, as they pertain to financial aspects surrounding property transactions and ownership, rather than the everyday costs associated with managing the property itself.