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 Building Residual Technique is an appraisal method where the income attributed to land is subtracted from the net operating income to determine the income generated by the building, which is then capitalized into the building's value.
Capitalization rate, commonly referred to as Cap Rate, is a real estate valuation measure used to compare different real estate investments. It is calculated by dividing the net operating income (NOI) by the current market value of the property.
A Cash Flow Mortgage is a unique debt instrument where almost all income from property rental is used to pay the lender, typically with no interest rate specified.
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 Debt Coverage Ratio (DCR) is a key metric used in real estate to assess the ability of an income-producing property to cover its annual debt payments. It helps lenders and investors evaluate the risk associated with a property loan.
Financial feasibility assesses whether a proposed land use or change in land use can economically justify itself. This evaluation is a crucial aspect of determining the highest and best use of the land but does not alone determine the optimal land use.
The Going-In Cap Rate, also known as the entry cap rate, is the ratio of the initial year's Net Operating Income (NOI) to the acquisition price of an investment property. This key metric helps investors assess the initial yield they can expect from a real estate investment.
The Income Approach is one of three methods used to appraise real estate value, primarily utilized for properties that generate consistent income, such as apartments, office buildings, hotels, and shopping centers.
The Land Residual Technique is a method used in real estate appraisal to estimate the value of land by using the net operating income (NOI) and the value and return of improvements on the property. It is especially useful for feasibility analysis and determining the highest and best use of a property.
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.
In accounting, the term 'Net Income' refers to the amount remaining after all expenses have been deducted from total revenue. It is a key measure of profitability and is also known as the bottom line. In appraisal, net income can often be termed as net operating income, and in personal finance, it refers to an individual's take-home pay after all taxes and deductions have been subtracted.
Net Income Before Recapture, also referred to as Net Operating Income (NOI), represents a real estate property's revenue minus all operating expenses, excluding income taxes and financing costs. It provides a useful metric for real estate investors to gauge a property’s profitability and investment potential before tax considerations and possible recapture of depreciation.
Net Operating Income (NOI) is a crucial metric in real estate investment that measures the profitability of a property or business after subtracting operating expenses but before interest and tax deductions. It serves as an indicator of the financial health and performance of income-generating real estate.
Net Operating Income (NOI) is a key performance metric used to evaluate the profitability of income-generating real estate assets. It represents the income produced by a property after deducting all operating expenses but before accounting for taxes, interest, depreciation, and amortization.
Operating income, also known as Net Operating Income (NOI), is a key financial metric used to assess the profitability of a real estate investment or business by calculating earnings before interest and tax deductions.
Operating leverage refers to the automatic increases in net operating income (NOI) or cash flow of income-producing real estate when income and expenses increase at the same rate; this effect is further enhanced when expenses are fixed.
The Overall Capitalization Rate (Cap Rate) is a metric used to evaluate the return on investment of a real estate property, usually expressed as a percentage. It helps investors determine the potential profitability of a property by comparing the annual net operating income (NOI) to the property's current market value or acquisition cost.
The Overall Rate of Return (OAR) is a metric that calculates the percentage yield of a property based on its Net Operating Income (NOI) divided by the property’s purchase price. This metric helps investors evaluate the profitability of real estate investments and compare different properties.
A tally of annual operating expenses for a Subject Property revised specifically for appraisal purposes. It considers stabilized annual figures and makes necessary adjustments to items to reflect accurate property operations and value.
Replacement reserve is a specific fund set aside from the net operating income to cover the eventual wear and tear of short-lived assets, such as carpeting, appliances, and other items that have a defined useful life.
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.
Stabilized income (or expense) represents the rental income or expense, or the net operating income that is expected to be reached upon completion of construction or after a major renovation. This anticipated level of income or expense reflects a stable financial performance of the property once it has been fully leased and operational.
