The Annual Mortgage Constant is a ratio that quantifies the total annual mortgage payments, including both principal and interest, compared to the initial loan principal. It is used by lenders and borrowers to determine the yearly cost of a mortgage and assess its affordability.
Before-tax cash flow refers to the amount of cash that a property generates before income taxes are deducted. This figure is critical for evaluating the performance of real estate investments and comparing different investment properties.
The Break-Even Point in real estate is the rental income or occupancy level necessary to cover all operating expenses and debt service, ensuring that the property does not operate at a loss.
Cash throw-off, often referred to as cash flow, is a crucial metric in real estate investment that indicates the amount of cash generated by a property after all operating expenses and debt service have been paid. It is a measure of the income-producing ability of a property.
Cash-on-cash return (CoC return) is a rate of return commonly used in real estate transactions that calculates the cash income earned on the cash invested in a property.
The Constant Annual Percent, also known as the Mortgage Constant, is the ratio of the annual debt service (which includes both principal and interest payments) to the original loan amount.
Debt service refers to the periodic payments, typically consisting of both principal and interest, made on a loan. It is a crucial concept in real estate finance and investment, as it impacts cash flow, profitability, and overall financial health of a property or investment.
Debt Yield is the Net Operating Income (NOI) divided by the amount of debt, primarily used by lenders to determine the sufficiency of a property's income to cover its debt service.
Financial leverage refers to the use of borrowed funds to increase an investment's potential return. While it can amplify returns, it simultaneously increases the risk of loss.
The Mortgage Constant is derived by dividing the total annual mortgage debt service, including both principal and interest, by the initial loan amount. It provides a useful way of calculating the annual cost of a loan as a percentage, making it easy to compare different mortgage options.
The mortgage constant is the percentage ratio between the annual debt service and the outstanding loan principal. It reflects both the interest and the amortization components of a loan and is used extensively in real estate to determine the annual loan payment.
Negative cash flow occurs when an income-generating property allows more expenses than revenue within a given period, causing the property owner to cover the shortfall from other investments or personal savings.
A measure used by lenders to determine the maximum percentage of a borrower's income that can be allocated to debt payments and still qualify for a loan. This ratio helps assess the lender's risk exposure.
Recasting is the process of adjusting a loan arrangement, often to prevent default, by extending maturity or changing the interest rate.
Residual value or income refers to the remaining value or income after necessary deductions to meet fixed obligations. This term is crucial in both real estate investments and appraisals.
A workout agreement entails a mutual effort by a property owner and lender to avoid foreclosure or bankruptcy following a default. It generally involves substantial reduction in the debt service burden during an economic depression.
