How to Reduce Operating Expenses at Your Multifamily Property

Learn how to reduce operating expenses at your multifamily property by improving maintenance, utilities, staffing, and administrative efficiency.

Reducing operating expenses is one of the most effective ways property owners and managers can improve net operating income (NOI). The key is finding opportunities to lower costs without compromising property performance or the resident experience.

In this guide, you’ll learn what operating expenses include, how to evaluate your spending, and practical strategies to reduce operating costs across your multifamily portfolio.

You’ll learn:

• What operating expenses include
• Why tracking operating expenses matters
• How to analyze your operating costs
• Practical ways to reduce operating expenses

Understand Your Operating Expenses

What Are Operating Expenses?

Operating expenses (OpEx) are the ongoing costs of operating and maintaining a multifamily property. These expenses are necessary to keep the property functional, occupied, and in good working order.

Common Operating Expenses

The exact operating expenses for a multifamily property will vary depending on its size, location, age, amenities, and management model. However, most properties incur costs across the following categories:

Approximate ranges based on the Institute of Real Estate Management (IREM) Income/Expense IQ National Summary benchmark. Actual operating expense allocations vary by property size, age, location, ownership structure, management model, and market conditions.

According to the Institute of Real Estate Management Income/Expense IQ benchmark, payroll, repairs and maintenance, utilities, insurance, and taxes consistently represent some of the largest operating expense categories for multifamily properties. These costs often present the greatest opportunities for operational savings when managed effectively.

Fixed vs. Variable Operating Expenses

Not all operating expenses are the same. Understanding which costs are fixed and which are variable can help property owners identify where savings are most achievable.

Fixed operating expenses remain relatively consistent regardless of occupancy. These typically include:

• Property taxes
• Insurance premiums
• Salaries for permanent staff

Variable operating expenses change based on occupancy, resident behavior, seasonal conditions, or market factors. Common examples include:

• Utilities
• Repairs and maintenance
• Landscaping and snow removal (where applicable)
• Marketing and leasing costs

While fixed expenses are often difficult to reduce, variable expenses typically offer the biggest opportunities for cost savings through operational improvements, preventive maintenance, and technology investments.

Measuring Your Operating Performance

Reducing operating expenses starts with understanding how your property is performing today. One of the most useful metrics for evaluating operational efficiency is the operating expense ratio (OER).

The operating expense ratio measures how much of your property’s gross operating income is spent on day-to-day operating expenses. It provides a quick snapshot of operational efficiency and can help identify opportunities to improve profitability over time.

Operating Expense Ratio Formula

The operating expense ratio is calculated using the following formula:

Let’s look at a sample calculation. For example, if a multifamily property generates $1,200,000 in annual gross operating income and has $480,000 in operating expenses:

A 40% operating expense ratio means the property spends 40 cents of every dollar earned on operating expenses, leaving the remaining 60 cents to cover debt service, capital expenditures, and profit.

Why the Operating Expense Ratio Matters

Looking at total expenses alone doesn’t tell you whether a property is operating efficiently. A larger apartment community will naturally spend more than a smaller one.

The operating expense ratio puts every property on the same scale by showing how much income is consumed by operating costs.

For example:

• Property A has an OER of 32%
• Property B has an OER of 46%

Even if Property B generates more revenue overall, it spends a much larger share of its income on operations. That can indicate higher utility costs, inefficient maintenance, excessive administrative expenses, or other operational issues that deserve closer review.

Because of this, investors, owners, and lenders commonly use the operating expense ratio when evaluating a property’s financial performance.

What Is a Good Operating Expense Ratio?

There isn’t a universal target, but many multifamily properties operate within an OER of roughly 35% to 45%. Actual ratios vary depending on factors such as:

• Property age
• Location
• Building amenities
• Utility structure (owner-paid vs. resident-paid)
• Staffing model
• Local taxes and insurance costs

Rather than focusing on a single benchmark, it’s more useful to compare your property against similar multifamily assets in the same market and monitor whether your ratio is improving over time.

Why Tracking OpEx Matters

A single operating expense ratio only tells part of the story. Monitoring your operating performance month over month or year over year can reveal trends that aren’t obvious from a single snapshot.

Regularly tracking your operating expenses can help you:
Identify rising utility or maintenance costs before they become significant issues

• Measure the impact of cost-saving initiatives
• Evaluate vendor performance and contract renewals
• Improve budgeting and capital planning
• Protect your property’s net operating income (NOI)

According to IREM, multifamily operating expenses increased 12% year over year in 2023 and have risen 61% since 2015.

AFIRE also analysed commercial real estate operating expenses and found that since 2019:

• Apartment operating expenses increased 22%
• Insurance costs increased 156%
• Utilities increased 23%
• Maintenance increased 22%
• Administrative expenses increased 24%

Use Expense Categories to Identify Cost-Saving Opportunities

If your operating expense ratio is trending upward, don’t just look at the total number. Break operating expenses into individual categories and compare each against prior years, months, or similar properties.

For example:

Monitoring individual expense categories helps you identify where costs are increasing before they significantly impact your property’s overall operating expense ratio.

7 Practical Ways to Reduce Operating Expenses

Once you have a clear understanding of your operating expenses, you can start identifying opportunities to reduce costs. The strategies below can help improve efficiency and lower ongoing operating expenses.

1. Invest in Preventive Maintenance

The old saying, “Prevention is better than cure,” holds true for multifamily properties, too. Staying ahead of maintenance issues is almost always less expensive than dealing with unexpected breakdowns.

One of the easiest ways to reduce operating expenses is to fix problems before they become expensive. While emergency repairs are sometimes unavoidable, many can be prevented through regular inspections and routine maintenance.

Focus on:

• HVAC systems
• Plumbing
• Electrical systems
• Elevators
• Roofing
• Fire safety equipment

A simple preventive maintenance schedule ensures inspections and servicing happen on time, helping reduce unexpected breakdowns, emergency callouts, and resident disruptions.

Why it works

• Prevents costly emergency repairs
• Extends the lifespan of building equipment
• Reduces downtime and service interruptions
• Makes maintenance expenses more predictable
• Improves resident satisfaction and retention

2. Improve Energy and Water Efficiency

Utility costs can account for a significant share of a property’s operating expenses. In older, less energy-efficient buildings, bills alone can eat up to 10%–20% of operating costs. Small efficiency upgrades may seem minor on their own, but together they can meaningfully reduce monthly utility bills and long-term operating costs.

Focus on:

• LED lighting in common areas
• Energy-efficient HVAC systems and appliances
• Low-flow faucets, showerheads, and toilets
• Smart irrigation systems for landscaping

According to the U.S. Department of Energy, LED lighting uses at least 75% less energy and lasts up to 25 times longer than incandescent lighting, making it one of the quickest upgrades to reduce both energy and maintenance costs.

Why it works:

• Reduces utility costs
• Lowers maintenance requirements
• Extends the lifespan of building systems
• Supports sustainability goals

3. Digitize Maintenance Requests

Payroll is one of the largest operating expenses for multifamily properties. Every hour spent answering phone calls, updating spreadsheets, or manually assigning work orders is time that maintenance staff is not spending on repairs.

A digital maintenance management system is designed to reduce that administrative work. Instead of relying on paper forms, emails, or phone calls, maintenance requests are submitted through a centralized platform that automatically creates work orders, assigns tasks, and tracks progress.

Industry data shows that modern work order software can automate more than 70% of maintenance requests, significantly reducing the amount of manual coordination required from property teams. Digital invoice matching can also reduce invoice processing time by up to 80%, freeing up staff for higher-value work.

Focus on:

• Online maintenance request portals
• Mobile work order management
• Automated task assignments and reminders
• Maintenance reporting and asset history

Why it works
Digital maintenance systems reduce the time staff spend on administrative tasks. That means technicians can complete more work orders without increasing headcount. Managers also gain access to maintenance history and reporting, making it easier to identify recurring problems, plan preventive maintenance, and make better budgeting decisions.

Benefits

• Reduces administrative labor
• Helps technicians complete more work orders
• Improves scheduling and communication
• Identifies recurring maintenance issues before they become costly repairs

4. Reduce Administrative Costs with Digital Parking

Management
Parking management is often a manual process. Property teams spend time assigning spaces, updating spreadsheets, issuing guest permits, and responding to resident requests. As communities grow, these routine tasks can consume valuable staff hours and increase administrative costs.

A digital parking management platform centralizes these workflows, automates repetitive tasks, and gives residents self-service tools. The result is less administrative work and more time for property teams to focus on higher-value responsibilities.

Real-World Example

Consider a 250-unit multifamily building. If the leasing office spends 10 hours each week handling parking assignments, guest permits, vehicle updates, and resident inquiries, digitizing those workflows can significantly reduce that workload.

Even saving 5 administrative hours per week equals:

The exact savings will vary by property size and parking demand, but reducing repetitive administrative work helps control one of the largest operating expenses: payroll.

How WhereiPark Helps Reduce Operating Expenses

While many parking platforms focus on managing resident parking, WhereiPark helps multifamily properties reduce the financial impact of operating expenses by generating revenue from unused parking spaces.

Property owners can:

• List vacant parking spaces for monthly rental
• Connect with local drivers through WhereiPark’s marketplace
• Earn recurring income from underutilized parking inventory
• Manage listings, bookings, and payments through a single platform
• Increase the return on an existing property asset without capital investment

Instead of leaving parking spaces vacant, properties can generate additional income that helps offset ongoing operating expenses such as maintenance, utilities, and property management

Beyond reducing operating costs, digital parking management can also help maximize the value of underused parking assets. Learn how multifamily properties are generating additional revenue from unused parking spaces.

5. Review Vendor Contracts Regularly

Many multifamily properties rely on third-party vendors for landscaping, cleaning, waste removal, pest control, security, HVAC servicing, and other essential services. Over time, these contracts can become outdated, especially as labor and material costs change.

Industry procurement experts recommend reviewing vendor contracts at least annually to benchmark pricing, evaluate service levels, and identify opportunities to consolidate services or renegotiate terms.
Competitive bidding can also help ensure you’re receiving market rates without sacrificing quality. Regular reviews not only reduce unnecessary spending but also improve vendor accountability and service performance.

Focus on:

• Compare pricing against current market rates
• Renegotiate long-term agreements where appropriate
• Evaluate service quality and contract performance
• Consolidate vendors to improve purchasing power when practical

Why it works

• Prevents contract costs from drifting above market rates
• Improves service quality through performance reviews
• Creates leverage during contract negotiations
  Identifies opportunities to reduce duplicate services

6. Improve Staff Efficiency

Labor is one of the largest operating expenses for multifamily properties, and those costs continue to climb. According to the U.S. Bureau of Labor Statistics, compensation costs for civilian workers increased 3.6% over the 12 months ending March 2026. As payroll expenses rise, improving staff productivity becomes just as important as controlling maintenance or utility costs.

Rather than increasing headcount, many property managers improve efficiency by streamlining routine administrative work and ensuring employees can support multiple operational functions.

Digital work orders, online resident portals, automated communications, and cross-training all help reduce manual tasks while allowing staff to spend more time on leasing, resident service, preventive maintenance, and other high-value responsibilities.

Focus on:

• Cross-train employees to handle multiple operational roles
• Automate repetitive administrative tasks where practical
• Standardize leasing and maintenance workflows
• Focus staff time on resident service and preventive maintenance

Why it works

• Improves productivity without increasing payroll
• Reduces time spent on repetitive administrative tasks
• Helps teams respond to residents more efficiently
• Allows staff to focus on work that supports occupancy and resident satisfaction

7. Reduce Paper-Based Processes

Paper leases, printed invoices, and manual approval workflows take time to manage and create unnecessary administrative costs. Digitizing documents and using electronic signatures can simplify these processes while reducing printing, mailing, and physical storage expenses.

According to Adobe’s Future of Time study, 72% of enterprise workers say searching for, sharing, and accessing files gets in the way of doing their jobs effectively, while 44% cite waiting for signatures as a productivity barrier. Moving document workflows online can reduce these administrative bottlenecks and free up staff to focus on residents and day-to-day operations.

Focus on:

• Store leases, invoices, and resident records digitally
• Use electronic signatures for leases and approvals
• Replace paper maintenance records with digital files
• Reduce printing, mailing, and physical document storage

Why it works

• Lowers printing and storage costs
• Reduces administrative workload
• Speeds up document approvals and retrieval
• Improves record organization and accessibility

Which Cost-Saving Strategies Have the Biggest Impact?

Not every cost-saving initiative delivers the same return. The table below compares each strategy based on its potential impact on operating expenses and the typical effort required to implement it. Actual savings will vary depending on your property’s size, age, existing systems, and management practices.

Note: The potential savings shown above are qualitative estimates based on common multifamily operating practices and industry experience. Every property is different, and actual cost savings will depend on factors such as building age, occupancy, local utility rates, labor costs, and how each strategy is implemented.

Frequently Asked Questions

What is a good operating expense ratio?

A good operating expense ratio (OER) for most multifamily properties is typically 35% to 45%, although the ideal range depends on the property’s age, location, and operating model.

Which operating expenses have the biggest impact on NOI?

Payroll, maintenance, utilities, property taxes, and insurance generally have the biggest impact on net operating income (NOI) because they represent the largest recurring operating expenses.

How can property managers reduce administrative costs?

Property managers can reduce administrative costs by automating routine tasks, digitizing paperwork, using online maintenance requests, and standardizing workflows to improve staff efficiency.

How does parking management software reduce operating expenses?

Parking management software reduces operating expenses by automating parking administration, minimizing manual work, and improving parking utilization. Platforms like WhereiPark can also help generate additional revenue from underused parking spaces.

Final Thoughts

Reducing operating expenses doesn’t require cutting resident services. By tracking costs, investing in preventive maintenance, improving operational efficiency, and adopting technology such as WhereiPark, multifamily operators can lower expenses while improving both staff productivity and the resident experience.