Return on equity is one of the financial measures used as well on other types of investments. In Real Estate analysis the return on equity means a ratio between cash…
Tag: real estate dictionary
Cash on Cash Return in Real Estate
Cash on cash return is in fact equity dividend rate. It is a ratio between annual cash flow before taxes and the total initial investment, expressed as a percentage. It…
Capitalization Rate (Cap Rate)
Capitalization rate (cap rate) is in fact the “discount rate”, used for discounting the future income to determine its present value. There are two main purposes for which cap rate…
House P/E Ratio
P/E (Price to Earnings) ratio is often used when measuring other investment tools, such as stocks. The Real Estate P/E ratio counts with the initial investment and annual net operating…
Debt Coverage Ratio (DCR)
Debt coverage ratio is the real estate ratio between the annual net operating income (NOI) and annual debt service (ADS) of the particular property. ADS is the total of 12…
Internal Rate of Return (IRR)
Internal Rate of Return (annualized yield rate) is a rate which an investment will return over the estimated period of ownership. It is in fact the discount rate that produces…
Profitability Index (PI): Real Estate Analysis
Profitability index (profit index) is very similar to NPV. It also calculates with the present values of future cash flows and discount rate, therefore it takes in account the time…
Break-Even Ratio (BER)
After a week, there is another term in our Real Estate Dictionary for all investors hungry for definitions! This one will definitely help you with your property analysis, especially if…
Operating Expense Ratio
Operating expense ratio is the ratio of operating expenses to the gross operating income (GOI). It is advisable to count this ratio not only on the total of operating expenses,…
Cash Flow (CFBT and CFAT)
Cash flow is probably the first term which real estate investors learn in property analysis. It simply represents all the inflows and outflows of cash for a certain property. Next…