Friday, December 10, 2010

Investment Property Lingo

If you are considering an investment in property, you will need to know the know the lingo!
Familiarize yourself with the industry terms such as:

Gross Income - Total income before taking out taxes and expenses

Vacancy Rate - Percentage of rental units unoccupied

Effective Gross Income (EGI)
- potential Gross Income less a vacancy and collection allowance, plus miscellaneous income.

Operating Expenses - Ongoing cost for running a business.

Net Operating Income (NOI) - Operating income after operating expenses are deducted, but before income taxesand interest are deducted.

Debt Service - The ratio of cash available for debt servicing to interest, principal and lease payments.

Cash Flow - The movement of cash into or out of your business.

Cash-on-Cash Return - The ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.

Capitalization Rate (Cap Rate) - The ratio between the net operating income produced by an asset and its capital cost or Marketing Value.

With the understanding of investment vocabulary you will be able to make better decisions and turn your dream of investing in commercial property, a reality. Take the time to do the research and consult with the experts before making any major financial investment!

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