--- title: Standard Operating Costs of Managing a Property description: Need Help Determining Your Operating Budget for Your Properties? Let's Review Operating Costs and How to Calculate Your Operating Expenses! image: https://www.powellpropertymgt.com/hubfs/Stock%20images/30.jpg --- 3 min read # Standard Operating Costs of Managing a Property [ Jan Wieder ](https://www.powellpropertymgt.com/seattle-area-property-management-blog/author/jan-wieder) : Nov 18, 2021 7:04:20 AM [seattle rental house](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/seattle-rental-house) [Real Estate Investing 101](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/real-estate-investing-101) [Tips for Landlords](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/tips-for-landlords) Managing a residential rental property requires planning, research, and know-how. While we can never fully predict the future, best-practice budgeting and understanding the costs of managing a property [will reduce headaches and nasty surprises for both property managers and tenants](https://www.powellpropertymgt.com/seattle-area-property-management-blog/south-king-county-multi-family-unit-investment) by ensuring that there is money in the budget if something unexpected occurs. It is a[ great time to purchase](https://www.powellpropertymgt.com/seattle-area-property-management-blog/seattle-real-estate-investment-2021) an investment property in the greater Seattle area! Powell has been a leader in quality property management across the commercial and residential spaces in Burien, WA, and surrounding areas for over a century and we’re happy to put [our expertise ](https://www.powellpropertymgt.com/seattle-area-property-management-blog/what-do-property-managers-do)to work for you. ## **What is an “Operating Budget” in Property Management?** The operating budget of a property is the expected amount of money both coming in and going out for a specific property. In other words, the income and expenses. As structures age, they require maintenance and upkeep. There is no exception. Understanding what is meant by “operating budget” from the outset can set you up for future success. Expenses included in this calculation are directly related to the daily expected costs of maintaining a property and include: - **Maintenance and small to moderate repairs** - This addresses daily repair needs and regular wear and tear, not big-ticket items or upgrades. - **Insurance **- Beyond typical insurance, consider that you may also need location-specific insurance such as flood or earthquake insurance.  - **Taxes **- Be sure you know your taxes for the property, and plan accordingly. - **Homeowner Association Fees **- If applicable. - **Utilities **- Electric, gas, water, waste, and internet may be included in the rent, but should be included as operating costs only if they are paid by the owner. - **Lawn care/Snow removal **- Leaving these up to the tenant may not be worth the fees and headache should they fail to maintain the lawn or shovel the sidewalk. Include this in the operating budget if you decide to hire someone else to do this work. - **Property Management Fees **- Property managers typically charge a small percentage of the total rent. This is truly[ a small price](https://www.powellpropertymgt.com/seattle-area-property-management-blog/5-ways-a-property-management-company-can-save-you-money) for the ability to take a much more [hands-off approach](https://www.powellpropertymgt.com/full-service-property-management-seattle) to all the details related to operating rental properties.   ## **What Do Operating Expenses Not Include?** Sometimes expenditures occur that appear outside the typical operating expenses discussed above.  It is important to understand which falls outside the category of operating expenses so that these items are also well supported by your budget. Examples of nonoperating costs include:  - **Mortgage Repayments** - This is not included in the operating expenses, which can surprise new landlords as they make their first budget. However, operating costs exist outside the cost of acquiring a property, which is why they are not included. - **Major Repairs/Improvements -** Depending on the age of the house, larger ticket items such as the roof or furnace will eventually need to be replaced. These large expenditures require separate consideration in your budget as they are not day-to-day expenses. - **Appliances **- When supplying appliances such as a refrigerator, washer/dryer, oven, or even hot water heater and HVAC, you need to be aware that these will only last for so long, and replacement over the years is inevitable. - **Advertising/Marketing **- The cost to find reliable tenants is not categorized as an operating expense as the necessity can fluctuate from year to year. - **Improvements made by renters **- Tenants’ voluntary improvements during occupancy are not reimbursable as operating expenses as these upgrades are not a requirement for the upkeep of the property. ## **How Do I Calculate Operating Expenses on a Rental Property?** The rule of thumb for calculating the operating expenses of a single-family property is that about one percent of the property’s total value will be needed for yearly maintenance. For example, a $350,000 property will require about $3,500 of maintenance a year. Recall, however, that this includes only moderate repairs. [Factors such as pets](https://www.powellpropertymgt.com/seattle-area-property-management-blog/pet-renting-seattle), the age of the property, and the number of occupants will impact your maintenance costs. Some landlords factor this extra cost in with pet fees. Other costs listed above, such as homeowner’s association fees, taxes, and insurance fluctuate slightly but are relatively known entities to include in your budget. These factors can change every year, however, so it’s a good idea to reevaluate your budget yearly. Calculating operating expenses is just the beginning. If you’re interested in further calculations to make sure you are on the right track, check out our [Real Estate Formulas Cheat Sheet](https://www.powellpropertymgt.com/seattle-area-property-management-blog/real-estate-formulas-cheat-sheet). ## **What Percentage of Rental Income goes to Operating Expenses?** Approximately fifty percent of rental income is generally apportioned to operating expenses. This is called the fifty percent rule. To illustrate, if rental income is $1600 per month, about $800 can be expected to be needed for operating expenses. However, the operating expense ratio on a single-family home is different from expected ratios for other kinds of real estate such as apartment buildings, condos, or retail spaces. It is wise to set rent accordingly in order to be sure to cover operating expenses without difficulty. Using this calculation to set rent saves headaches down the line by making sure expenses are covered. If you dig into your profit and loss statement and find your operating expenses are eating more than half your rent, you may be interested in [ways to reduce your operating costs.](https://www.powellpropertymgt.com/seattle-area-property-management-blog/ways-reduce-apartment-expenses-operating-costs-washington) ## **What Can We Do for You?** We are trusted area experts and are confident we can add value and simplify your experience by managing your property in Burien, WA, and the neighboring communities. Give us a call or [contact us today](https://www.powellpropertymgt.com/contact-powell-property-management) so we can start the conversation about your specific property today!    [![How to Get Maximum Rent for Your Property](https://no-cache.hubspot.com/cta/default/3017557/68153d2c-eb16-498a-9122-ec064d40e16b.png)](https://cta-redirect.hubspot.com/cta/redirect/3017557/68153d2c-eb16-498a-9122-ec064d40e16b)   - [Tweet](https://twitter.com/share) [![7 Ways to Reduce Apartment Expenses and Operating Costs in Washington](https://www.powellpropertymgt.com/hubfs/Blog%20Images/rooftop%20patio%20seattle%20apartment.jpg) ](https://www.powellpropertymgt.com/seattle-area-property-management-blog/ways-reduce-apartment-expenses-operating-costs-washington) #### [7 Ways to Reduce Apartment Expenses and Operating Costs in Washington](https://www.powellpropertymgt.com/seattle-area-property-management-blog/ways-reduce-apartment-expenses-operating-costs-washington) [Jan Wieder](https://www.powellpropertymgt.com/seattle-area-property-management-blog/author/jan-wieder) : Aug 3, 2020 11:25:00 AM As the old adage goes, you have to spend money to make money. As the landlord of an apartment complex or other multifamily dwelling in the Seattle... [Real Estate Investing 101](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/real-estate-investing-101) [Tips for Landlords](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/tips-for-landlords) [Read More](https://www.powellpropertymgt.com/seattle-area-property-management-blog/ways-reduce-apartment-expenses-operating-costs-washington) [![What Expenses to Expect When Operating an Apartment Complex](https://www.powellpropertymgt.com/hubfs/Blog%20Images/12.jpg) ](https://www.powellpropertymgt.com/seattle-area-property-management-blog/operating-expenses-apartment-complex) #### [What Expenses to Expect When Operating an Apartment Complex](https://www.powellpropertymgt.com/seattle-area-property-management-blog/operating-expenses-apartment-complex) [Shannon Browning](https://www.powellpropertymgt.com/seattle-area-property-management-blog/author/shannon-browning) : Jan 17, 2023 10:49:48 AM When evaluating your options for expanding your investment portfolio, purchasing an apartment complex is often suggested as a smart way to diversify... [Real Estate Investing 101](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/real-estate-investing-101) [Tips for Landlords](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/tips-for-landlords) [Multi-Family Units](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/multi-family-units) [Read More](https://www.powellpropertymgt.com/seattle-area-property-management-blog/operating-expenses-apartment-complex) [![Proactive Maintenance: 6 Things Every Landlord Should Do](https://www.powellpropertymgt.com/hubfs/Blog%20Images/15.jpg) ](https://www.powellpropertymgt.com/seattle-area-property-management-blog/proactive-maintenance-6-things-every-landlord-should-do) #### [Proactive Maintenance: 6 Things Every Landlord Should Do](https://www.powellpropertymgt.com/seattle-area-property-management-blog/proactive-maintenance-6-things-every-landlord-should-do) [Jan Wieder](https://www.powellpropertymgt.com/seattle-area-property-management-blog/author/jan-wieder) : Oct 19, 2021 8:00:00 AM Whether you own individual homes or an apartment building, real estate is an excellent investment. However, one of the biggest expenses to any... [seattle rental house](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/seattle-rental-house) [Real Estate Investing 101](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/real-estate-investing-101) [Tips for Landlords](https://www.powellpropertymgt.com/seattle-area-property-management-blog/topic/tips-for-landlords) [Read More](https://www.powellpropertymgt.com/seattle-area-property-management-blog/proactive-maintenance-6-things-every-landlord-should-do) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Jan Wieder", "url" : "https://www.powellpropertymgt.com/seattle-area-property-management-blog/author/jan-wieder" }, "dateModified" : "2024-10-31T20:10:58.052Z", "datePublished" : "2021-11-18T15:04:20.000Z", "headline" : "Standard Operating Costs of Managing a Property", "image" : [ "https://www.powellpropertymgt.com/hubfs/Stock%20images/30.jpg" ], "mainEntityOfPage" : { "@id" : "https://www.powellpropertymgt.com/seattle-area-property-management-blog/operating-costs-managing-property", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.powellpropertymgt.com/hubfs/powell-property-management-logo.png" }, "name" : "Powell Property Managment" } } ``` ```json { "@context": "https://schema.org", "@type": "HomeAndConstructionBusiness", "@id": "https://www.powellpropertymgt.com/#organization", "name": "Powell Property Management", "url": "https://www.powellpropertymgt.com", "logo": "https://3017557.fs1.hubspotusercontent-na1.net/hubfs/3017557/powell-property-management-logo.png", "image": "https://3017557.fs1.hubspotusercontent-na1.net/hubfs/3017557/Building%20Wealth%20Creating%20Passive%20Income%20With%20Your%20Investment%20Properties.jpg", "description": "Powell Property Management is a full‑service property management company serving South King County, West Seattle, Burien, Normandy Park, SeaTac, Des Moines, Kent, North Tacoma, Auburn and surrounding areas. 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