How should real estate investors prepare for rising operating costs?

Investors should budget for mid-single digit annual increases in operating expenses because insurers and municipalities are raising premiums and property taxes steadily through 2029. Planning for two to five percent yearly cost growth helps avoid surprises. Incorporating this into underwriting assumptions preserves cash flow margins. Additionally, cost-effective property improvements that increase rent by three to seven percent can offset rising expenses and reduce vacancy, improving investment resilience.