Operating Expense Ratio (Real Estate)
Computes a property's operating expense ratio: operating expenses divided by gross operating income, as a percentage. It measures how much of the rental income is consumed by the costs of operating the property, such as maintenance, management, taxes and insurance, not counting financing. The lower it is, the more efficient the property; a very low value may signal deferred maintenance. It's a key indicator in income-property analysis. Enter the operating expenses and the gross operating income.
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Operating Expense Ratio (Real Estate)
Computes a property's operating expense ratio: operating expenses divided by gross operating income, as a percentage. It measures how much of the rental income is consumed by the costs of operating the property, such as maintenance, management, taxes and insurance, not counting financing. The lower it is, the more efficient the property; a very low value may signal deferred maintenance. It's a key indicator in income-property analysis. Enter the operating expenses and the gross operating income.
How much of the rent vanishes into costs
Buying an income property based on gross rental income is a classic trap: what matters is what's left after operating the property. The operating expense ratio measures precisely how much of the income is devoured by the costs of keeping the property running, before even thinking about financing.
That includes maintenance, management, property taxes, insurance, common charges. The lower the ratio, the more efficiently the property converts rent into operating profit. But beware ratios that are too low: sometimes they hide maintenance being pushed forward, a bill that always arrives. The typical figure varies a lot by property type and age.
Enter the annual operating expenses and the gross operating income (potential rent minus vacancy). The tool returns the ratio as a percentage. It's a cousin of what's left as net operating income, the NOI, which is the starting number for computing the cap rate and valuing the property.
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Down Capture Ratio
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Burke Ratio
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.