Operating Margin

Operating margin is operating profit divided by revenue. In real estate the equivalent is the NOI margin: net operating income divided by effective gross income. It is the flip side of the expense ratio, and the two always add up to 100%.

The default house keeps $28,892 of its $45,600 in collected rent, an NOI margin of about 63%. Its expense ratio is the remaining 37%. The calculator shows the expense ratio and labels it lean, typical, heavy or very heavy.

The margin helps when comparing buildings of different sizes. A fourplex and a 40-unit building can't be compared on dollars, but both can be compared on how much of each rent dollar survives operating costs. A margin far above similar properties usually means an expense is missing.