From our review of the record, the decision of the BTA is unreasonable and unlawful. The decision is vacated and the cause is remanded for further consideration.
The BTA found, and neither party disputes, that the best method of valuing subsidized apartments is the income approach.
The second paragraph of the syllabus of Alliance Towers, Ltd. v. Stark Cty. Bd. of Revision (1988), 37 Ohio St.3d 16, 523 N.E.2d 826, one of the three leading cases involving valuation of subsidized apartments, states:
“An apartment property built and operated under the auspices of the Department of Housing and Urban Development is to be valued, for real property tax purposes, with due regard for market rent and current returns on mortgages and equities.” See, also, Canton Towers, Ltd. v. Stark Cty. Bd. of Revision (1983), 3 Ohio St.3d 4, 3 OBR 302, 444 N.E.2d 1027, and Oberlin Manor, Ltd. v. Lorain Cty. Bd. of Revision (1989), 45 Ohio St.3d 56, 543 N.E.2d 768.
While there is no dispute about what kind of rent is applicable (“ ‘economic rent is a proper consideration in a situation in which contract rent is not truly reflective of true value in money,’ ” Canton Towers, supra, 3 Ohio St.3d at 7, 3 OBR at 305, 444 N.E.2d at 1030, quoting Wynwood Apts., Inc. v. Cuyahoga Cty. Bd. of Revision [1979], 59 Ohio St.2d 34, 37, 13 O.O.3d 19, 21, 391 N.E.2d 346, 347), none of these cases specifically discusses the appropriate treatment of expenses in determining the value of subsidized apartments.
Villa Park points out that Garvin “reviewed actual expenses and market expenses” and “stabilized operating expenses to reflect ‘market expenses.’ ” Villa Park argues that all apartments (subsidized and nonsubsidized) have expenses for administration, utilities, maintenance, insurance, etc. that can be stabilized to reflect market expenses. We agree.
American Institute of Real Estate Appraisers, The Appraisal of Real Estate (9 Ed.1987) 445, states:
“Operating expenses are the periodic expenditures necessary to maintain the real property and continue the production of the effective gross income.
if * * Íf!
“ * * * [A]n appraiser analyzes and reconstructs expense statements to develop a typical expense expectancy for the property on an annual accrual basis.
“Operating expense estimates usually list fixed expenses, variable expenses, and a replacement allowance.” (Emphasis sic.)
Garvin reviewed and stabilized expenses and developed an expense budget that included administrative and other operating expenses and reserves for replacement.
*218The BTA found that Garvin erred in using actual expenses. The question is: Did Garvin use actual expenses improperly or, as he contends, by proper adjustments to actual expenses, did he stabilize them to “reflect market operating expenses”? In other words, did he employ an alternate way of showing expenses that was equivalent to using market operating expenses?
In Oberlin Manor, supra, we criticized the board of revision’s appraiser for basing “his opinion on data from other subsidized apartments and actual income, expense, and cost figures from Oberlin Manor.” Id., 45 Ohio St.3d at 56, 543 N.E.2d at 768. We accepted the opinion of value expressed by Oberlin Manor’s appraiser, based on “information derived from the general apartment market.” Id.
Garvin’s testimony in the instant appeal may be equivalent to information derived from the general apartment market and, thus, would be likewise acceptable, based as it is on his analysis that adjusted actual expenses to “reflect economic or market expenses” and that included reserves for replacement to compute net rentals. “Such reserves are proper items of expense to be utilized when estimating the true value of real property through an income approach.” Freshwater v. Belmont Cty. Bd. of Revision (1991), 58 Ohio St.3d 140, 141, 568 N.E.2d 1215, 1217.
Here, as in Freshwater, the following caveat applies: “The BTA should analyze the reserves to determine if they include any inappropriate items, or if they are otherwise excessive, which would warrant a modification in the amount deducted as expenses.” Id.
The BTA should also decide, in the context of Garvin’s testimony, the meaning of the terms' “stabilized” and “reflective of’ and whether Garvin’s stabilized expenses are in accordance with economic or market expenses.
In its review of the record, the BTA apparently overlooked the fact that the cost of electricity was included in the rent that Phase I tenants paid and that Garvin adjusted his market rent to compensate for this. The BTA observed: “$108,500 [Garvin’s electricity expense] is excessive for electricity since the market rents used in the income approach presume the tenants will pay electricity.” This error affected the BTA’s determination of market expenses and the resultant true value. The BTA should review the $108,500 cost of electricity to see what impact, if any, it has on market rent and market expenses and whether Garvin correctly calculated for this expense.
The decision of the BTA is reversed and remanded to the BTA with instructions to (1) review and reconsider the record, (2) make factual findings, that are supported by the record, of the appropriate economic or market rents and expenses to be used in the income approach to value, and (3) indicate the specific *219calculations the BTA uses to determine the fair market value or the “true value in money” of the subject property.
Decision reversed and cause remanded.
Moyer, C.J., A.W. Sweeney, Wright, Resnick and Pfeifer, JJ., concur. Douglas and F.E. Sweeney, JJ., dissent.