Finance category
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Operating Expense Ratio Calculator
Calculate the operating expense ratio (OER) for a rental property. Enter income and itemized expenses to see OER on effective gross income, OER on gross potential, and resulting net operating income.
Annual income
Laundry, parking, pet rent, etc.
Annual operating expenses
Do not include mortgage principal or interest — those are debt service, not operating expenses.
OER (on effective gross income)
28.7%
benchmark: 35–45% healthy, >55% concerning
OER (on gross potential)
27.5%
Effective gross income
$34,440
Net operating income
$24,540
EGI – operating expenses
How to Use
- Enter gross potential rent, vacancy/collection loss, and any other income.
- Itemize annual operating expenses: taxes, insurance, management, maintenance, utilities, HOA, and other costs.
- Exclude mortgage principal and interest — those are debt service, not operating expenses.
- Review the OER on effective gross income. Stabilized single-family rentals typically land in the 35–50% range.
- Feed the NOI into cap rate and DSCR calculators to finish the underwriting picture.
Frequently Asked Questions
What is a good operating expense ratio?
Single-family rentals usually run 35–50% OER. Small multi-family 40–55%. Class-C properties and older buildings often 50–60%. Anything above 60% suggests deferred maintenance, inefficient management, or a genuinely problematic asset.
Does OER include the mortgage payment?
No. Operating expenses exclude debt service. This separation lets OER be compared apples-to-apples across leveraged and unleveraged deals, and lets NOI feed cap rate cleanly.
Should I include capex in OER?
Accountants usually capitalize major expenditures and amortize them, so they appear on a depreciation schedule rather than in operating expenses. Investors often include a capex reserve inside OER to avoid understating long-run costs.
How is OER different from the 50% rule?
The 50% rule is a shorthand: operating expenses will equal roughly 50% of rent over the long run. OER is the actual ratio calculated from real numbers. Use the 50% rule for a first pass; OER for underwriting.
Related Calculators
Cap Rate Calculator
Calculate cap rate from the NOI produced by this OER analysis.
Rental Cash Flow Calculator
Turn OER into a full monthly cash-flow view with debt service.
DSCR Calculator
Pass NOI to lender DSCR underwriting.
Break-Even Occupancy Calculator
Use OER and debt service to find the minimum occupancy you need.
Maintenance Reserve Calculator
Size a credible maintenance line inside the OER build-up.
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