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A variable expense is an expense that changes depending on the situation, specifically related to the occupancy of a property. These expenses are impacted by how much the property is being used or occupied, and they can go up or down depending on that level of use.
For example, imagine a building that is used for both residential and commercial purposes. If the building is fully occupied, the utility bills may be higher because more people are using water and electricity. Similarly, if there are more tenants or users in the building, the cost of painting, maintenance, and management fees may increase as well.
"A Deep Dive for Real Estate Appraisers"
A few additional points to keep in mind about variable expenses:
Importance of tracking: Variable expenses can be more difficult to track than fixed expenses since they depend on occupancy levels. As an appraiser, it's important to obtain accurate data on a property's variable expenses to help determine its value.
Impact on income: Variable expenses can also have an impact on a property's income potential. For example, if a property's utility bills are high, the property owner may need to increase rent to cover those costs.
Comparison with other properties: When appraising a property, it's important to compare its variable expenses to those of similar properties to ensure accuracy and consistency.
Impact on maintenance: Occupancy levels can also affect the level of maintenance needed for a property, which can impact its variable expenses. For example, if there are more tenants in a building, the cost of maintenance may be higher due to increased wear and tear.
Understanding the impact of variable expenses on a property's value is essential for real estate appraisers. By keeping these points in mind, you can more accurately assess the value of a property and provide valuable insights to your clients.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In the land of appraisals, expenses come in two,
Fixed or variable, it's important to view.
Variable expenses change as we go,
Depending on occupancy, high or low.
Utility bills, painting, and more,
Are variable expenses, that we keep in store.
When the building's full, costs may rise,
But when it's empty, expenses may surprise.
Remember these expenses, both big and small,
As you study for your exam, for they're important for all.
Variable or fixed, they're part of the plan,
As you appraise a property, or offer a hand.