Determining your in-place expenses

[Jorge Abreu]

Operating expenses look at the regular and ongoing costs incurred by a property on a monthly or yearly basis. These expenses include property taxes, insurance, maintenance, administrative and office costs, payroll, marketing expenses, and property management fees. To calculate these expenses, one needs to review the T-12 operating statement, which provides detailed information on past expenses and helps estimate future expenses as the new owner.

It is important to analyze the statement for inconsistencies and missing items. Multifamily investors should be aware that operating expenses cannot be passed on to tenants, and property tax is a significant expense to consider. It is crucial to research whether the property value will be reassessed upon purchase to avoid underestimating expenses during the underwriting process, as some US states reassess property values when real estate is sold.

In addition to reducing expenses, we also explore additional income streams. Offering internet and renters insurance are two examples of income streams that can be added to the property. Actually, on all our properties we got a bulk package plan where we get a good amount of profit just from offering internet. By leveraging services that residents already need, we can generate additional income while providing value to our tenants.