Controlling expenses is an absolute way to make your building more profitable. Of course, there is always the question as to which expenses should trimmed. Are maintenance expenses out of line? What do other people pay for insurance and taxes? Am I being charged fairly for management? Do the amenities justify the cost to maintain them?

One way to achieve some comfort with your expenditures is to know what other people in similar circumstances are experiencing. It doesn't make you wrong if your figures don't agree with their numbers. In fact, they rarely will or should. However, the more information you obtain the better perspective you will have on your building's operations.

The chart (upper-right) was based upon data assembled by IREM, the Institute of Real Estate Management. It details some broad categories of income and expense for apartment buildings in a nine state regional area. It might be interesting for you to compare this general data with your building's performance and see if there are large variances.

The largest administrative expense is for management. It tends to be 45% to 80% of this category. Utilities make up the majority of the Operating Expenses. Taxes are usually three to five times greater than insurance expense.

Of course, the object is to keep the NOI as high as possible on a consistent basis. The value of your building is, to a great extent, a function of the income which it generates. - MH