In a property management budget, which of the following items is considered an operating expense?

Mortgage interest is classified as a financing expense rather than an operating expense. It represents the cost of borrowing money to finance the property and is not directly tied to the property's operational activities. While important for overall budgeting, it does not fall under the category of expenses incurred in the regular management of the property.

Depreciation is an accounting method used to allocate the cost of tangible assets over their useful lives. Although it reflects the reduction in value of the property and its components, it is not a cash expense incurred during operations. Instead, it serves as a non-cash adjustment on financial statements and does not represent an outflow of cash associated with running the property.

The construction of a new garage is categorized as a capital expenditure rather than an operating expense. This type of expense is associated with acquiring or improving a long-term asset and typically involves a significant investment that enhances the property's value rather than being a recurring cost of operations.