In multifamily real estate, labor, maintenance, and operation costs continue to rise. According to GlobeSt., operating expenses rose 28% nationwide in 2024, leading to higher debt costs, stalled proposals, and construction delays. [1] 

In 2025, multifamily operating expenses continue to be pressured from rising insurance costs, inflation, stalled proposals, and increased labor expenses, potentially impacting operational margins and net operating income (NOI). [2][3][4]

Strategic hiring, effective data use, labor optimization, economical building, and technology can all mitigate costs and improve operations in multifamily real estate. This article will explore expense categories (controllable vs. noncontrollable) and strategies for reducing these expenses.

OPERATING EXPENSES DEFINED

Operating expenses (OpEx) are the recurring costs of operating and maintaining a property. Operating expenses for multifamily apartment buildings can include running and maintaining the property, legal fees, repair costs, property taxes, janitorial fees, insurance premiums, utilities, and general/administrative costs. [5] These expenses are divided into two broad categories: controllable and noncontrollable.

EXPENSE CATEGORIES

Controllable

Controllable operating expenses refer to costs directly influenced by property management teams and their owners. These include maintenance, general and administrative expenses (G&A), utilities, marketing, vendor negotiations, etc. We will focus on two groups: maintenance and utilities.

Maintenance is the process of preserving or maintaining something. In the case of multifamily apartment buildings, this means landscaping, servicing HVAC systems, weatherizing the property, and turning units. 

• Landscaping for large properties can be uniquely challenging. As the property’s introduction to a community, its curb appeal is of key significance. Depending on the property’s location, upkeep typically entails trimming trees and shrubs (or, in the case of desert landscapes, texturizing rocks/gravel), mowing lawns, updating fencing, and generally enhancing the appearance of the building. 
• HVAC is an acronym for heating, ventilation, and air conditioning. Multifamily properties can use either centralized or decentralized HVAC systems. The former is more energy efficient but has higher installation costs, while the latter is cost-effective, but means each unit within the building has its own system. Smart technology can be a costly feature upfront and is often considered a capital improvement. Still, it can enhance resident satisfaction, improve energy efficiency, and save on expenses in the long run. [6]
• Weatherizing is something most properties, even single-family homes, partake in. This process protects the property from wind, rain, and extreme temperatures. By sealing air leaks, improving insulation, and making modifications to optimize its energy efficiency, the property can be more resistant to outside weather conditions. [7]
• Turning a unit, or a “unit turn,” is readying a rental unit for a new resident after one leaves. Turning a unit can entail repainting, restoring life to decaying floors, and general appliance repair. Unit/move-out inspections and deep cleaning also play into this process to prepare the unit for immediate occupancy, narrowing its vacancy window as much as possible.

Utilities are services (such as light, power, or water) that a public or private entity provides. [8] Utilities can be a significant ongoing operating expense. Not only are many components associated with each type of utility (water, light, etc.), but costs vary widely in each subgroup of utilities and are highly dependent on factors such as resident usage, weather, and unit size. Some properties implement RUBS (ratio utility billing system) or sub-metering to pass utility costs to residents and reduce owner liability and expenses.

As controllable expenses, operators and their management teams can benefit from tending to these costs routinely. Regular inspections and updates should be preventative rather than reactive. For example, preventative maintenance can catch system(atic) failures before they happen. The earlier nonperformance can be detected, the better.

Noncontrollable Operating Expenses

Property management teams do not directly influence noncontrollable operating expenses, including taxes, insurance, and any other expense largely outside operators’ control due to market or regulatory factors.

• Property Taxes: Generally speaking, property taxes can be one of, if not the most considerable, noncontrollable expenses that property owners must contend with. This type of tax is typically measured as a percentage of the property’s assessed value. [9] As a regressive tax, the taxation rate is the same regardless of the taxpayer’s income level. [9] Taxpayers with significantly less income are held to the same payment standard as wealthy individuals. Only the property’s assessed value, not the owner’s income level, determines one’s property tax obligation. 

Active investors and property owners should know the appeal processes and tax reassessment risks when dealing with property taxes. Every county in the United States has an Assessor’s Office, responsible for assessing the value of properties in their county. While each county has unique guidelines for appealing an assessment, one throughline is finding comparable properties in the same county to support your claim. The inherent risk of tax reassessment is that local governance can reduce costs as quickly as it can increase them. Simply put, “By drawing attention to your property, discoveries can be made that actually increase the assessed value rather than lowering it.” [10] This means that after implementing physical value-add strategies to your property, a reassessment could increase the value of your property, thereby increasing your tax obligation. While this can indicate increased property value, a reassessment could reduce cash flow if not factored into the underwriting or budgeting process.

• Insurance: There are several types of insurance in commercial multifamily real estate. Click here for more on commercial vs. residential multifamily real estate. Below are some popular insurance options  property owners might consider:
  • Commercial general liability
  • Commercial property insurance
  • Business interruption insurance
  • Excess liability coverage
  • Workers’ compensation
  • Equipment breakdown insurance
  • Commercial auto
  • Force majeure or specialty coverage (flood, earthquake, etc.) [11]

One critical insurance policy we’ll discuss is the umbrella insurance policy. This policy is additional liability coverage that insures beyond the property owner’s underlying policies. [12] As a second security blanket, this policy can protect property owners against vandalism, invasion of privacy, libel, slander, injuries caused to others, and damages to other people’s property once the primary policy limits have been met. [12] 

Minimizing insurance costs is no simple feat, especially as a noncontrollable expense. However, increasing your deductible to reduce premium costs, bundling policies, implementing security upgrades, and conducting regular property/policy assessments to ensure appropriate coverage levels can all strategically reduce this noncontrollable expense. [13] These proactive steps can help control insurance-related costs and ensure the property remains protected and insurable over time. 

WORK WITH BAM CAPITAL FOR MULTIFAMILY REAL ESTATE INVESTING

As the foundation of any owner/operator or sponsor’s business plan, operational expertise demands the highest-quality resources and results. BAM Capital is a vertically integrated owner/operator that partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.

Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

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SOURCES:

[1]: Fannie Mae. (2025). “Multifamily Economic and Market Commentary.” https://www.fanniemae.com/media/54646/display#:~:text=Vacancy%20Expected%20to%20Increase%20Briefly,5.75%25%20from%202005%20through%202022.