Real Estate Terms

Real Estate Terms


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REAL ESTATE TERMS

COMMONLY USED WHEN INVESTING

 

Price/ Sq Ft

Price per Square Foot is a commonly used metric to compare properties. It is obtained by dividing the property price by the livable square feet in the property.

 

Rent/ Sq Ft

Rent per Square Foot is a commonly used metric to compare properties. It is obtained by dividing the estimated monthly property rental income by the livable square feet in the property.

 

Pre-tax Annual Cash-on-cash return

Pre-tax Annual Cash-on-cash return measures the annual total cash received by the Investor relative to the total investment in the property, before taxes.

 

Post-tax Annual Cash-on-cash return

Post -tax Annual Cash-on-cash return measures the annual total cash received by the Investor relative to the total investment in the property, after taxes.

 

Cap rate

Cap Rate is the ratio of the net income produced by a property (after expenses, but independent of financing) and its price.

 

IRR

The Internal Rate of Return is the annualized effective compounded return rate which can be earned on the invested capital, i.e. the yield on the investment.

 

GRM

Gross Rent Multiplier is the ratio of the price of a property to its annual rental income before all expenses, including property taxes, property management, insurance, etc.

 

Rent Ratio

Rent Ratio is the ratio of the monthly rental income for a property to its price.

 

Pre-tax Annual Cash Flow

Pre-tax Annual Cash Flow measures the total cash returned to the Investor during the calendar year, after financing costs, but before taxes. The figure is independent of first-year down payment and closing costs, or final year sale proceeds.

 

Pre-tax Monthly Cash Flow

Pre-tax Monthly Cash Flow measures the total cash returned to the Investor during the average month, after financing costs, but before taxes. The figure is independent of first-year down payment and closing costs, or final year sale proceeds.

 

Post-tax Annual Cash Flow

Post -tax Annual Cash Flow measures the total cash returned to the Investor during the calendar year, after financing costs and taxes. The figure is independent of first-year down payment and closing costs, or final year sale proceeds.

 

Post -tax Monthly Cash Flow

Post-tax Monthly Cash Flow measures the total cash returned to the Investor during the average month, after financing costs and taxes. The figure is independent of first-year down payment and closing costs, or final year sale proceeds.

 

Equity in Property

Equity in Property measures the total equity owned by the Investor in the current year, including property value escalation, repaid loan principal, and property improvements.

 

Future Property Value

Future Property Value represents the Fair Market Value of the property in the current year, assuming property improvements and value escalation.

 

Cap Rate Implied by NOI/ Price

Cap Rate Implied by NOI/ Price derives the property “Cap Rate” by dividing the property’s actual Net Operating Income (NOI), or income after expenses and taxes (but before financing), by the property price.