Operating Expense Ratio (OER)

OER tells you how efficiently a property runs. If your OER is 45%, then 45 cents of every dollar of rent goes to taxes, insurance, maintenance, PM fees, utilities, and other operating costs. The remaining 55 cents becomes your NOI. A low OER is a green flag for a well managed property in a stable neighborhood. A high OER is a warning sign that the property either has expensive deferred maintenance, a bad property manager, or high fixed costs like taxes and insurance relative to rent. The 50% rule you see in beginner investor content is actually just a lazy OER of 50%. In reality, well run single family rentals in the Midwest and Southeast often run 35 to 45% OER. Class C properties with heavy maintenance and Section 8 compliance costs can push 50 to 60%. Coastal California and Florida coastal properties with high insurance can exceed that.