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What is deficit?
What is an operating deficit?

What is deficit?

Deficit is often used in finance to refer to a difference between a cash inflow and outflow – the deficit is the amount by which outflow exceeds inflow, or by which expenses exceed income over a period of time (“annual operating deficit”).

What is an operating deficit?

In real estate development, payments for operating expenses and property taxes usually begin before rent collection from tenants can begin, so it is required that funds be allocated towards these expenses, known as “operating deficit”.

This is one of the “hidden costs” of real estate development, along with Capitalized Financing fees and the Origination Costs of Debt.

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