Economically the most accurate method of calculating optimal holding period is based on net present value. We can calculate NPV of the investment, when it would be hypothetically sold in…
Category: Real Estate Terms & Definitions
In this category there will be posted all definitions of various ratios and calculations, used in the real estate analysis and our free real estate investment software. Feel free to comment or ask about any term.
Return on Investment (ROI) in Real Estate
Return on investment (ROI) is one of the very popular measurements, because it usually presents very high percentages. However it does not take in account time value of money, and…
Gross Rental Yield
Gross rental yield is one of the simpler calculations and can be used for a particular property or also as a market indicator when using median values of rent and…
Gross Rent Multiplier
Gross rent multiplier is usually used for estimating the market value of the investment property. It is used when comparing properties in a similar area and of a similar type….
Return on Equity (ROE) in Real Estate
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…
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…
Estimated Value using Cap Rate
Last month, we described the calculation of Capitalization Rate in this post. There is however more usual use of the cap rates. In this case, when the cap rate of similar properties in a…
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…
Depreciation
Depreciation (or sometimes called cost recovery) is the amount of the tax deductions that an investor can take each year from the depreciable asset, until this asset is fully written…
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…