OPEX Ratio (Operating Expense Ratio)
A quick efficiency check for how much income gets consumed by operating costs
The Operating Expense Ratio (often called the Opex ratio) shows what percentage of a property’s income is used to pay operating expenses. It is a simple way to evaluate how efficiently a property runs and to spot buildings where expenses may be unusually high.
Operating Expense Ratio = Operating Expenses ÷ Effective Gross Income
Effective gross income is the income you expect to collect after vacancy and collection loss, plus any additional income such as parking, laundry, or storage. The result is expressed as a percentage.
Investors use the Opex ratio to compare similar properties in the same market and to sanity-check underwriting assumptions. A ratio that is unusually high can indicate operational inefficiency, poor management, or deferred maintenance that is showing up as ongoing costs. A ratio that is unusually low can be a red flag for underbudgeting, which often leads to future cash flow surprises. Knowing the Opex ratio helps you protect NOI and make more reliable comparisons between deals.