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Commercial and investmentSubject 16 of 19

Operating expense

A recurring cost of operating and maintaining an income property that is included in the standard NOI calculation.

Direct answer

What does Operating expense mean?

A recurring cost of operating and maintaining an income property that is included in the standard NOI calculation.

Exam cue: Property taxes, insurance, management and routine maintenance may qualify. Debt service and depreciation do not in the standard formula.

What does it look like in a question?

New York example

The owner subtracts management fees and utilities paid by the owner from effective gross income.

Common exam trap

What should you not confuse it with?

A capital improvement is not automatically a current operating expense.

Related commercial and investment terms

Cash flowMoney remaining or changing hands during a period after the receipts and payments included in the stated calculation.Effective gross incomeIncome expected or received after vacancy and collection loss, plus other property income included in the analysis.Gross leaseA lease in which the landlord pays specified property operating expenses from the rent received.LeverageThe use of borrowed money to finance part of an investment.LiquidityThe ease and speed with which an asset can be converted to cash without a substantial loss in value.Net leaseA lease under which the tenant pays specified property expenses in addition to rent.
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The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.

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