Operating expense ratio (OER) shows what share of a property's income is consumed by the cost of running it. You divide annual operating expenses, meaning management, insurance, property taxes, maintenance, utilities you cover, and a vacancy allowance, by gross operating income. A building with $18,000 of operating expenses on $45,000 of income has a 40% OER.
Because it excludes the mortgage, OER isolates operating efficiency rather than financing. There is no single correct number, since it varies with a property's age, type, and who pays utilities, but a rising OER over time is a warning that costs are outrunning rent. It is the mirror image of the share that flows through to NOI: the lower your OER, the more of each rent dollar reaches the bottom line.