Metrics
What Is the Operating Expense Ratio?
The operating expense ratio is the share of a property's income consumed by operating expenses. It is the quickest sanity check on a seller's numbers.
Expense ratio = Operating expenses ÷ Effective gross income × 100
When a property claims an expense ratio far below what comparable properties run, the expenses have usually been understated rather than genuinely managed away. That makes the ratio the fastest red flag to check before you trust an NOI. What counts as normal varies by asset and by how utilities are handled.
See where it fits among the warning signs in red flags and risks to price in.
See it on a real deal
RVP Underwriter computes this from your documents automatically, with every figure shown and sourced. Underwrite a deal free.
Related terms
Part of the RVP Underwriter glossary of income-property underwriting terms. Browse all definitions, or put them to work with the free calculators.