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Operating Expense Ratio Calculator

Divide operating expenses by effective gross income to get the operating expense ratio — and the net operating income left over.

Operating expenses (annual)

Effective gross income (annual)

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How it works

OER = operating expenses ÷ effective gross income × 100 · NOI = EGI − operating expenses

The operating expense ratio shows how much of each income dollar is consumed by running the property, before debt and capital improvements. Well-run stabilized apartments often land near 35–50%, though older buildings, all-bills-paid units and heavy management push it higher. Because operating expenses specifically exclude mortgage payments and capital replacements, comparing OER across properties is only fair when everyone defines expenses the same way.

Worked example

With $70,000 of operating expenses on $180,000 of effective gross income, the ratio is 70,000 ÷ 180,000 = 38.9%, and net operating income is $110,000.

Frequently asked questions

What is excluded from operating expenses?

Mortgage principal and interest, capital expenditures (roofs, HVAC replacements), depreciation and income taxes are all excluded. Operating expenses cover only the recurring cost of running the property — taxes, insurance, management, repairs, utilities and reserves.

What is a good operating expense ratio?

For stabilized multifamily, 35–50% is common; below that can signal deferred maintenance, and well above can signal inefficiency or a heavier-service property. Always compare against similar building type, age and utility structure.

How does OER relate to NOI?

They are two views of the same split: OER is the expense share of income, and NOI is the dollars left after those expenses. A lower OER means a higher NOI for the same revenue.

Related calculators

Effective Gross Income Calculator

Turn gross potential rent into effective gross income by subtracting vacancy and credit loss and adding other income — the real top line of a property.

Break-Even Occupancy Calculator

Find the occupancy rate a rental must hold to cover operating expenses plus debt service — and the cushion above break-even before you lose money.

Vacancy & Operating Expense NOI Calculator

Build a rental property’s net operating income from gross rent, a vacancy allowance and operating expenses — the foundation of any valuation.

Operating Margin Calculator

Calculate operating income and operating margin from revenue, cost of goods sold and operating expenses — plus the gross margin alongside.

Educational estimate, not financial or investment advice.