Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

What are the two largest expense categories as a percentage of Gross Potential Rent (GPR)?

1. Management fees and utilities

2. Property taxes and payroll

3. Marketing costs and maintenance supplies

4. Insurance and salary costs

The correct answer is: Property taxes and payroll

The correct choice identifies property taxes and payroll as the two largest expense categories relative to Gross Potential Rent (GPR). This is significant because property taxes are typically one of the largest fixed costs associated with owning and operating rental properties. These taxes are based on the assessed value of the property and can represent a substantial outlay. Payroll, including salaries for onsite management and maintenance staff, constitutes another significant expense. As personnel are critical to the day-to-day operations of an apartment community, labor costs can take up a considerable portion of the total expenses, often ranking right alongside property taxes. Understanding this is essential for effective budget management in property management, allowing supervisors to anticipate and control key expenditures that directly impact profitability. Efficient management of these categories can lead to better financial performance and a more sustainable operation. In contrast, while management fees, utilities, marketing costs, and insurance are certainly important, they generally do not account for the same large percentage of GPR as property taxes and payroll.