What Does OER Mean in Real Estate?

In real estate, OER stands for Operating Expense Ratio.

It’s a financial metric used to measure how efficiently a property is being managed by comparing its operating expenses to its gross operating income (GOI).

Formula

Key Points

• Operating Expenses usually include property taxes, insurance, utilities, repairs/maintenance, management fees, and other recurring costs, but exclude debt service and capital expenditures.
• Gross Operating Income (GOI) is the income a property generates after accounting for vacancy losses but before deducting operating expenses.
• A lower OER generally indicates more efficient management and better profitability, while a higher OER suggests expenses are eating up a larger share of income.

Example

If a multifamily property has:

• Gross Operating Income = $1,000,000
• Operating Expenses = $450,000

Then:

This means 45% of the income is used to cover operating costs, leaving 55% available for debt service and profit.