Property Management
What is the 'operating expense ratio' (OER) for a rental property?
AThe ratio of NOI to property value
BTotal operating expenses divided by effective gross income, expressed as a percentage✓ Correct
CThe ratio of management fees to total expenses
DThe tenant's expense share as a percentage of rent
Explanation
Operating Expense Ratio = Operating Expenses ÷ Effective Gross Income. A lower OER indicates more efficient operations.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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