Property Management
What is an 'operating expense ratio' (OER) and how is it used in Nevada property management?
AOER = Gross Income ÷ Total Expenses
BOER = Total Operating Expenses ÷ Gross Operating Income; it measures what percentage of income is consumed by operating expenses, helping assess property efficiency✓ Correct
COER = Net Operating Income ÷ Property Value
DOER is only used for commercial property management in Nevada
Explanation
The Operating Expense Ratio = Total Operating Expenses ÷ Effective Gross Income (or Gross Operating Income). A lower OER means more income flows through to NOI.
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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.
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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Math Concepts
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