Underwriters commonly load in 8–12% for management (even if self-managed) and 5–8% vacancy. Being too optimistic on OpEx is the #1 way investors overpay.
Market & Valuation
Operating Expenses (OpEx)
Recurring costs of running a property — taxes, insurance, management, maintenance, utilities, vacancy allowance.
More in Market & Valuation
- NOI (Net Operating Income)— Gross income minus operating expenses — excludes debt service, capex, and income taxes.
- CapEx (Capital Expenditures)— Large periodic replacements — roofs, HVAC, water heaters, appliances — budgeted separately…
- Vacancy Rate— The percentage of time a rental is expected to sit empty between tenants.
- Cap Rate (Capitalization Rate)— NOI ÷ Purchase Price — the unleveraged annual yield of a commercial property.
- Cash-on-Cash Return— Annual pre-tax cash flow divided by the total cash you invested to acquire the deal.
- Cash Flow— The money left after collecting rent and paying every expense including the mortgage.