Operating Expense Ratio Calculator Formula

Understand the math behind the operating expense ratio calculator. Each variable explained with a worked example.

Use the Operating Expense Ratio Calculator

Formulas Used

Operating Expense Ratio

oer = (operating_expenses / gross_income) * 100

Net Operating Income

noi = gross_income - operating_expenses

NOI Ratio

noi_ratio = ((gross_income - operating_expenses) / gross_income) * 100

Variables

VariableDescriptionDefault
operating_expensesTotal Operating Expenses(USD)22000
gross_incomeEffective Gross Income(USD)55000

How It Works

Operating Expense Ratio

The OER shows what percentage of a property's gross income is spent on operating costs. A lower OER indicates more efficient property management.

Formula

OER = Operating Expenses / Effective Gross Income x 100

Benchmarks

  • Single-family rentals: 35-45%
  • Small multifamily: 40-50%
  • Large apartment complexes: 45-55%
  • Commercial office: 40-50%

    • Worked Example

    A property has $22,000 in operating expenses on $55,000 effective gross income.

    operating_expenses = 22000gross_income = 55000
    1. 01OER = $22,000 / $55,000 x 100 = 40.0%
    2. 02NOI = $55,000 - $22,000 = $33,000
    3. 03NOI ratio = $33,000 / $55,000 x 100 = 60.0%
    4. 04A 40% OER means 40 cents of every income dollar goes to expenses

    Ready to run the numbers?

    Open Operating Expense Ratio Calculator