Variables and units
Operating Expenses
Annual operating expenses.
currency
Gross Operating Income
Annual income before operating expenses.
currency
Real Estate · Income
Operating Expense Ratio
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Use operating expense ratio to compare operating efficiency across properties and time periods.
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Expense efficiency check
Operating ExpensesGross Operating Income
Expenses consume 31.82% of gross operating income.
Common mistakes
- Using debt service as an operating expense.
- Comparing buildings with different expense pass-through structures.
Step-by-step example
Expense efficiency check
1. Start with the example inputs
- Operating Expenses$70,000
- Gross Operating Income$220,000
2. Apply the formula
Operating ExpensesGross Operating Income3. Run the numbers
31.82%
Expenses consume 31.82% of gross operating income.
What this result means
An expense ratio of 31.82% means that share of collected income goes to running the property before any debt payments. Many stabilized rentals land somewhere around 35–50%, but property type and who pays utilities swing it widely — a number far outside your comparables usually means missing or padded expense lines.