Operating Expense Ratio (OER)

In real estate, the operating expense ratio (OER) is a measurement of the cost to operate a piece of property compared to the income brought in by the property. It is calculated by dividing a property’s operating expense (minus depreciation) by its gross operating income and is used for comparing the expenses of similar properties. An investor should look for red flags, such as higher maintenance expenses, operating income, or utilities that may deter him from purchasing a specific property.