The operating expense ratio (OER) is very common in real estate analysis, whereby analysts are measuring the costs to operate a piece of property versus the income it generates.
Why the Operating Expense Ratio Matters
Operating expenses are costs associated with running a business's core operations on a daily basis. Thus, the lower a company's operating expenses are, the more profitable it generally is. Over time, changes in the OER indicate whether the company can increase sales without increasing operating expenses proportionately (i.e., if the business is scalable). In multifamily real estate, companies can compare properties by using the ratio.
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