What do operating expenses refer to in property management?

Operating expenses in property management refer to the ordinary and typical costs incurred in the day-to-day operations of a property. These expenses include necessities such as property maintenance, management fees, utilities, insurance, and property taxes. They are essential for ensuring that a property remains functional, safe, and in good condition for tenants or occupants.

Unlike other types of expenses, operating expenses are recurring and crucial for the ongoing operation of the property. They do not include extraordinary expenses related to significant upgrades or enhancements to the property that would not typically be encountered in regular operations. This is why operating expenses are categorized separately from costs related to capital improvements, which are investments aimed at increasing the property's value or extending its useful life. Thus, it is clear why the answer focusing on the everyday expenses necessary to keep a property in service is the correct choice.