What is OER?

Operating Expense Ratio (OER) measures the share of rental income consumed by operating expenses. It excludes debt service and capital expenditures.

Formula:
OER = Operating Expenses ÷ Gross Operating Income

Why It Matters

• Efficiency Indicator: Reveals whether income is being spent wisely or wasted on high costs.

• Benchmarking Tool: Compare OER across properties to spot operational strengths or weaknesses.

• Profit Driver: Lower OER means higher NOI, which boosts value and financing options.

Example

A Phoenix fourplex earns $60,000 Gross Operating Income and has $27,000 in Operating Expenses.

OER = 27,000 ÷ 60,000 = 45%

That means 45% of gross income is spent on expenses, leaving 55% as NOI.

OER in Phoenix Today

• 35–50% is common for stabilized single-family and multifamily rentals.

• Newer builds or HOA-heavy areas may run higher.

• Older properties with low maintenance and efficient systems can sometimes run leaner.

Final Thoughts

OER is about efficiency. Two properties with the same gross rent may have very different profitability depending on their expense structure.

As your Phoenix investor-friendly agent, I’ll help you analyze OER in context — so you can maximize cash flow and long-term property value.

📞 Contact Me Today
Brian Harris
Investor-Friendly Real Estate Agent
📍 Phoenix, AZ
📧 [email protected] | 📞 602-684-0198
🌐 www.azdreamsource.com