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Minor fixes to the article
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maira563 committed Feb 21, 2025
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Expand Up @@ -29,19 +29,19 @@ The **cost structure of a REIT** depends largely on the type of REIT. Equity REI

### Key Cost Categories in a REIT

1. **Corporate Governance & Compliance Costs \
1. **Corporate Governance & Compliance Costs**
**These include **board compensation, directors’ and officers’ insurance, legal, audit, and tax expenses**. These costs ensure that the REIT operates within regulatory frameworks, maintains transparency, and protects its executives from liability risks.
2. **Employee Compensation & Administrative Costs \
2. **Employee Compensation & Administrative Costs**
**This category includes **employee salaries, benefits, and general administrative expenses**. These costs are essential for managing daily operations, overseeing properties, and ensuring smooth internal processes.
3. **Property Operating Costs \
3. **Property Operating Costs**
**These include **maintenance, utilities, repairs, and other expenses required to keep properties functional**. These costs fluctuate based on the number of properties owned and market conditions.
4. **Property & Asset Management Fees \
4. **Property & Asset Management Fees**
**These cover **fees paid to external or internal managers for overseeing property operations and managing assets**. Property management fees are typically tied to occupancy rates, while asset management fees may be structured as a percentage of total assets.
5. **Transaction & One-Time Costs \
5. **Transaction & One-Time Costs**
**These include **costs associated with acquiring, selling, or impairing properties, as well as consulting and legal fees for major transactions**. While these costs are not recurring, they impact overall financial performance in specific periods.
6. **Insurance & Risk Management Costs \
6. **Insurance & Risk Management Costs**
**This includes **insurance policies that protect properties, executives, and corporate operations**. These expenses help mitigate risks related to property damage, liability claims, and unforeseen business disruptions.
7. **Gains & Losses on Property Sales \
7. **Gains & Losses on Property Sales**
**This represents the **profit or loss from selling real estate assets**. While REITs aim to generate gains from sales, any losses in this category could signal poor asset performance or unfavorable market conditions.

### Fixed vs. Variable Costs
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