operating expenses

Definition

The recurring costs of keeping a property functional—utilities, maintenance, management, insurance, and property taxes—everything except debt service. It's the monthly financial hemorrhaging that separates rental income from actual profit.

Example Usage

The property's operating expenses ran 45% of gross income, leaving a decent margin before mortgage payments.

Origin

Business accounting terminology applied to property management

Fun Fact

The industry rule of thumb is operating expenses consume 40-50% of rental income, though many rookie landlords discover this the expensive way.

Source: Real estate accounting and property management terminology

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