Which expenses are considered controllable expenses in real estate?

Which Property Management Expenses are Considered Controllable Expenses?

In real estate, controllable expenses include costs that property managers or owners can influence, such as maintenance and repairs, administrative costs, and utilities. These also encompass marketing and advertising expenses, property management fees, as well as landscaping and cleaning services. Effective management of these expenses is crucial for balancing cost savings with maintaining the property's value and appeal.

Here's a quick overview on the expenses that are typically considered controllable:

  1. Maintenance and Repairs: Regular upkeep and fixing issues that arise. This includes both routine maintenance and addressing specific repair needs.
  2. Administrative Costs: Expenses related to the day-to-day operations of the property, such as office supplies, software for property management, and staff salaries.
  3. Utilities: While some utility costs might be fixed or the responsibility of tenants, in some cases, especially in common areas of commercial or multifamily properties, these costs can be controlled to an extent through efficient usage and conservation measures.
  4. Marketing and Advertising: Costs associated with attracting new tenants, such as online listings, print ads, and promotional events.
  5. Property Management Fees: If the property is managed by a third party, these fees can sometimes be negotiated or reduced based on the level of service required.
  6. Landscaping and Cleaning Services: Regular upkeep of the property’s exterior and interior common spaces. This can vary based on the contract and the extent of services required.
  7. Pest Control: Regular pest control measures to maintain the property.

Controllable expenses are distinguished from non-controllable expenses, which are costs the property owner cannot influence directly. Examples of non-controllable expenses are property taxes, utilities, and certain types of maintenance like snow removal. These costs can vary significantly and are generally not within the direct control of the property owner or manager. While some expenses like insurance and real estate taxes can be influenced to some extent (e.g., through negotiation or challenging assessments), they are largely considered fixed and outside the direct control of the property management.

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