What is the Operating Expenses Ratio (OER)?

The Operating Expenses Ratio (OER) is defined as operating expenses divided by Effective Gross Income (EGI). This ratio is used in real estate and property management to assess the efficiency of property management and how well a property is operating in relation to its income. By examining the relationship between operating expenses and EGI, stakeholders can understand the portion of income that is used to cover operating expenses, which is critical for evaluating property performance.

A lower OER suggests that a property is more efficient at generating income relative to its operating costs, whereas a higher OER may indicate that a significant portion of income is being consumed by operating expenses, potentially flagging areas for improvement. This ratio assists in comparing the operational efficiency of different properties, allowing for better investment and management decisions.

Other options do not accurately capture the definition of the OER as understood in real estate financiability and analysis.