Real Estate Investment Software
 

Real Estate Investment Software

Quick and Easy Analysis
Real Estate Software & Rental Property Software

866-290-4183

Follow Us on Twitter

HomeAnalysis SoftwareSeminars & BooksTutorialsTestimonialsSupportBlog!Prices

Landlord's
Cash Flow Analyzer
®
Up to 20-Year Analysis

Software Features
Screen Shots and Reports
Partner Analysis Module
IRA, Roth, 401(k) Module

Order and Download

Flipper's® Rehabber's®
Software

Monthly Analysis

Flipper Software
Software Features
Screen Shots and Reports
Order and Download


Software Upgrades


Testimonials and Reviews
Tutorials
LIVE Analysis Classes


Canada and Australia

Canadian Version
Australian  Version



 

Definitions

Operating Expense Ratio

Internal Rate of Return

Modified Internal Rate of Return (MIRR)

Net Operating Income (NOI)

Loan to Value Ratio (LTV)

Cash on Cash Return

Capitalization Rate

Gross Rent Multiplier (GRM)

Debt Coverage Ratio (DCR)

Real Estate Terms

Operating Expense Ratio


The Operating Expense Ratio (OER) is the ratio of the total operating expenses and the effective gross income of the property. Operating expenses are costs associated with the operation and maintenance of the property. Typical property expenses include such items as property taxes, insurance, pest control, utilities, repairs and maintenance, supplies, advertising, attorney fees, accounting fees, and lawn maintenance.

Operating expenses do not include loan payments, mortgage insurance payments, or capital improvements.

The effective gross income is the "gross scheduled" rental income plus "other" income less amounts provided for vacancy and credit losses. Other income can include items such as amounts received from laundry, vending machines, parking fees, and late fees. Think of effective gross income as the income from a property that you actually receive rather than what you should be receiving.

The operating expense ratio is calculated as follows:


Operating expense ratio = Operating Expenses / Effective Gross Income


Example: An income producing property has gross scheduled rents of $100,000 plus $2,000 of other income for a total income of $102,000. The property’s vacancy rate is 5% or $5,000. The property’s operating expense is $45,000.

The effective gross income for the property is calculated as $100,000 + 2,000 - 5,000 or $97,000.

The operating expense ratio is calculated as follows:

 

$45,000 (Operating expenses)
_____________________

 = 46.39 %

  
$97,000 (Effective Gross Income)



The operating expense ratio shows us that 46.39% of the property's income is being spent on rental operating expenses. The calculation in the Cash Flow Analyzer ® can be found in the Financial Measurements section of the Cash Flow Analysis report.

An operating expense ratio can also be calculated on a per expense basis. The individual calculations can be compared to similar income properties. Significant differences in comparing these ratios can alert you to problems areas. The individual expense calculations can be found in the Annual Property Operating Data (APOD) of the Cash Flow Analyzer software ®.

The operating expense ratio can also be an indicator of whether a property is being managed efficiently. The lower the operating expense ratios, the better the property is performing which obviously should result in more rental profit.

 


30-Day Money-Back Guarantee
Free technical support

 

RentalSoftware.com,  375 Rockbridge Rd, Suite 172,  Lilburn, GA 30047    866-290-4183

Copyright © 1993 - 2014    Cash Flow Analyzer®  Flipper's®  Rehabber's®  Note Buyer®  All rights reserved.

Note Buyer's Software l Landlord Software l Tax Lien Software l Real Estate CPA l Landlord Book & Real Estate Forms

Private Money Workshops  Private Money Home Study Course  l  Real Estate Group Formation Manual