Operating Costs

Explore operating costs in Canadian real estate: what they include, how they’re passed to tenants, and how they impact profitability and valuation.

Operating Costs

June 16, 2025


What are Operating Costs?

Operating costs are the recurring expenses associated with owning and managing a property, including taxes, insurance, utilities, repairs, and property management fees.

Why Operating Costs Matter in Real Estate

In Canadian real estate, operating costs influence rent levels, investment returns, and budgeting for both commercial and residential properties.



Typical operating costs include:
  • Property taxes
  • Building insurance
  • Utilities (heat, water, electricity)
  • Maintenance and repairs
  • Management fees



In commercial leases, these costs are often passed through to tenants in full or in part, depending on lease structure (e.g., triple net or gross).



Understanding operating costs helps buyers, tenants, and landlords accurately project cash flow and value properties effectively.

Example of Operating Costs in Action

The landlord includes snow removal and building insurance in the operating costs billed back to the retail tenant under their net lease.

Key Takeaways

  • Includes recurring property-related expenses
  • Affects profitability and tenant charges
  • Varies by lease type and property use
  • Must be factored into financial planning
  • Important for both owners and tenants

Related Terms

Additional Terms

Rent Control

Rent control refers to government regulations that limit how much landlords can increase rent for residential tenants each year.. more

Receivership

Receivership is a legal process where a court or secured creditor appoints a receiver to take control of a borrower’s assets, such as property or. more

REALTOR

A REALTOR is a licensed real estate professional who is a member of the Canadian Real Estate Association (CREA) and adheres to its Code of Ethics and. more

Property Use History

Property use history refers to the documented past uses, functions, and occupancy of a property, which may affect environmental risk, zoning, or. more

Property Management

Property management is the oversight and administration of real estate assets on behalf of the owner, covering leasing, maintenance, financial. more

Property Maintenance

Property maintenance refers to the ongoing upkeep, repair, and management of a building or land to preserve its safety, functionality, and appearance.. more

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