Operating Expense

Operating expense, or OpEx, is the recurring cost of running and maintaining a multifamily property and a key driver of NOI.

Definition

An operating expense, or OpEx, is a recurring cost required to run and maintain a multifamily property. Common examples include repairs and maintenance, utilities, insurance, administrative costs, contract services, marketing, and management fees. Operating expenses are separate from capital expenditures, which are larger investments such as renovations or replacements that improve or extend the life of the asset.

Example

A 250-unit community budgets monthly operating expenses for landscaping, pest control, HVAC repairs, property insurance, office supplies, and utilities. If actual utility and repair costs run above budget, the regional manager reviews the variance to understand the impact on property performance.

Why It Matters?

Operating expenses directly affect net operating income (NOI), a core measure of multifamily financial performance and valuation. Tracking OpEx helps operations leaders spot cost increases, compare properties, manage budgets, and decide which expenses are controllable versus driven by taxes, insurance, or market conditions.

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