Glossary · OPERATIONS

OpEx

Operating Expenses - all recurring costs of running a property, excluding debt service and capital expenditures.

OpEx includes property management fees, taxes, insurance, repairs and maintenance, utilities, advertising, landscaping, and administrative costs. It excludes principal and interest payments (debt service) and major capital improvements (CapEx). The OpEx ratio - OpEx as a percentage of Effective Gross Income - benchmarks property efficiency. Healthy OpEx ratios range from 35-45% for SFRs to 45-55% for larger multifamily. A high OpEx ratio (60%+) on a stabilized property signals mismanagement, deferred maintenance, or inflated costs. Accurate OpEx is essential for calculating NOI, which drives cap-rate valuation and seller-financing term negotiation.

Related Terms

Cap Rate

Capitalization rate - the ratio of NOI to property value, used to price and compare income-producing

NOI

Net Operating Income - gross revenue minus operating expenses, before debt service and capital expen

Rent Roll

A schedule listing each rental unit, current tenant, lease dates, rent amount, and payment status.

T-12

Trailing 12 Months - a property's actual operating income and expenses over the prior 12-month perio

Vacancy Rate

The percentage of a property's rentable units or space that is unoccupied during a given period.

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