How is the Net Income Ratio (NIR) calculated?

The Net Income Ratio (NIR) is calculated as 1 minus the Operating Expense Ratio (OER). This relationship captures the portion of income that remains after covering all operating expenses. By determining the Operating Expense Ratio, which indicates the percentage of effective gross income spent on operating expenses, you can subtract that value from 1 to arrive at the NIR. This resulting ratio provides a valuable measure of the property's profitability, effectively showing the proportion of income retained after expenses.

Calculating the NIR in this way aligns with financial analysis concepts where you assess how much of your income is leftover after all feasible deductions. This insight is particularly useful for property assessors and investors to gauge how efficiently a property is managed and to make informed investment decisions.