Example

A property has a gross operating income of $97,116. Expenses for the property are $40,052. What's the operating Ratio?

It's 41.2%. Round to 41%.

Handy Ratio

You can use the operating ratio consider how efficiently the property is performing. It is the ratio between the operating expenses and the gross operating income. Many investors use this ratio to identify properties that have high operating expenses.

Many find this ratio is quite handy. Unfortunately, much confusion exists as to whether the divisor is potential rental income, effective rental income, or gross operating income. Indeed, many investors use potential rental income rather than gross operating incoome.

It should not be considered a substitute for more careful analysis.