Expense Ratio

Operating Expense Ratio in Commercial Real Estate

Operating Expense Ratio in Commercial Real Estate

An operating expense ratio, or OER, sometimes simply known as an expense ratio, is a metric comparing a property's operating expenses to the amount of income it generates. To determine a property's operating expense ratio, you can use the formula below: 

Operating Expenses/Gross Operating Income = Operating Expense Ratio 

For example, a building with operating expenses of $40,000 a year that brings in $100,000 of gross income would have a 40% OER.