National Real Estate Exam (PSI)Leasing and Property ManagementMedium
A property manager is compiling a budget for an apartment building. Which of the following would be classified as a variable expense?
- ARepairs due to tenant damage
- BMortgage interest
- CBuilding insurance premiums
- DProperty taxes
Show answer & explanationAnswer & explanation
Correct answer: A. Repairs due to tenant damage
Variable expenses fluctuate based on the property's operations or unforeseen events. Repairs due to tenant damage are unpredictable and vary significantly, making them a classic variable expense.
Why the other options are wrong
- B. Mortgage interest is a fixed or predictable debt service cost, not a variable operating expense.
- C. Building insurance premiums are typically fixed annual costs, not variable.
- D. Property taxes are generally fixed or predictable annual expenses, not variable.
Variable Expenses (Property Management)
Operating expenses that fluctuate depending on the occupancy, usage, or unforeseen events at a property.
- Harder to predict than fixed expenses.
- Examples include utilities (depending on lease), repairs, advertising.
- Property managers must budget for contingencies.
Memory trick: VARIABLE expenses 'Vary' with activity.