Investopedia explains 'Operating Expense Ratio - OER'
The operating expense ratio is a useful tool when comparing the expenses of similar properties. If a particular piece of property has a much higher OER for a particular expense, such as maintenance, an investor should see that as a red flag and should look deeper into why maintenance expenses are so much higher than comparable properties.
For example, consider a piece of property with a gross operating income of $50,000. Total operating expenses are $6,200, which include utilities ($700), insurance ($1,500) and taxes ($4,000). The overall OER would be 12.4% ($6,200/$50,000) and the broken down OER for each of the expenses would be 1.4% for utilities ($700/$50,000), 3% for insurance ($1,500/$50,000), and 8% for taxes ($4,000/$50,000). The investor can then compare these percentages to other similar properties.
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