Operating Expense Ratio [2104]

An apartment complex, has a potential gross income of $500,000.  Vacancy and bad debt losses are 6%.  If operating expenses are $205,000, what is the operating expense ratio? [2104]

Operating Expense Ratio = Operating Expenses / Effective Gross Income

EGI = $500,000 x 0.94 = $470,000

Operating Expense Ratio = $205,000 / $470,000 = 43.6%