RCRE – Operating Expenses 101
Dylan and Mike discuss operating expenses and the future risks of eachKey Information:
Management Fee= % of Income the property management in. Verify if other fees are included
Repairs & Maintenance are recurring maintenance such as turn costs, touchup costs, etc
R&M should be increasing at the rate as the Consumer Price Index (CPI) due to material costs
General & Admin (G&A) includes office expenses, computers, technology, golf carts
G&A will increase due to your management’s view on technology moving forward
Contract Services include trash, landscaping, pest control, and other services
Contract services will increase due to increasing wages
Marketing Costs have shifted from being physical ads to technology
Payroll includes salary, benefits, turnover costs, and continuing education
Payroll will continue to increase because labor markets are continuing to be more competitive
Utilities include water, electric, and gas for office, common areas, and vacant units
Natural resources continue to increase in prices and you have to build a buffer just in case
Property Tax increase on the front end when you purchase a property due to the assessed value is increasing to the market
Property tax can also increase due to mill rates increasing
Insurance has been increasing substantially from last year due to more claims being created
Expert Pro Tip: Befriend property management companies
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