Texas Property Tax Consultant Practice Exam

What are considered fixed expenses in property management?

1. Only operational repairs

2. Maintenance and vacancy loss only

3. Taxes, insurance, and maintenance

4. Replacement costs only

The correct answer is: Taxes, insurance, and maintenance

Fixed expenses in property management refer to costs that remain constant regardless of the occupancy status or operational activities of the property. These expenses include items that property managers must budget for consistently, making option C the correct answer. Taxes are a significant part of fixed expenses since they are assessed on the property value by local governments and need to be paid regardless of whether the property is rented out. Similarly, insurance is also a fixed cost that protects the property owner from various risks and is required to maintain coverage for the property. Maintenance can be considered fixed in the sense that regular and routine maintenance upkeep must occur to ensure the property remains in good condition, regardless of tenant occupancy. In contrast, other options do not encompass the broader category of fixed expenses effectively. Operational repairs can be variable depending on the property’s condition and demand. Maintenance might be viewed as a fixed expense if it refers to routine upkeep, but it isn't categorized broadly alone as maintenance can also include variable costs triggered by wear and tear or tenant actions. Vacancy loss, on the other hand, represents a lack of income due to unoccupied space and is more of a variable expense related to socioeconomic factors and market demand rather than a fixed obligation. Replacement costs vary significantly based on necessity and timing, making it an inappropriate