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Real estate investing terms you need to know

Real estate investment terms - today's topicReal estate investment terms - today's topic

Cash Flow…cap Rate…cash on cash return…

Is it enough to blow your mind, eh?

We have compiled this primer for our readers the most frequently asked questions, our customer service team encounters. Use our investor members to important real estate terms define and help you navigate our website articles, see our real estate investing articles library day in, day out. So today, we focus on three important words that need to know real estate investors: cash flow, Cap rates and cash on cash return.

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CASH FLOW

Annual net operating income is also often called cash flow. This is the annual income or loss of the investment actually to collect a years worth of rent and generates the payment of annual expenditure relating to ownership and operation of property. Cashflow is calculated by subtracting the annual total operating expenses from the annual gross rental income.

The formula used is:

Annual net operating income annual gross rental income annual = total operational expenses

Read InvestorLoft's expanded explanation of the cash flow.


CAP RATE

Cap rate is a component of the return on investment for real estate investment property, how it buy price and is based on the amount of annual net operating income property (including mortgage payments or taking into account of income tax) compared yield to the purchase price of the property.

Cap rate is calculated by operating net profit (or cash) of divided by the purchase price as investment property.

The cap rate formula is:

Cap rate = annual net operating income (not including mortgage payments) / purchase price

Read InvestorLoft's extended explanation Cap Rate.


CASH ON CASH RETURN

The cash on cash return of a property is often called the return a property. Cash on cash return a way of evaluating is cost, the return on investment of real estate investment property on your expenses based on the amount of the annual net operating income property (not on income tax) will yield compared to your deposit and repair cost. The cash on cash return formula is calculated by the annual net operating income of investment held property divided by the amount of your deposit and immediate repair costs.

Is cash on cash return formula:

Cash on delivery cash return = annual net operating income / (down payment + repair cost)

Read InvestorLoft's expanded explanation of the cash on cash return.

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Tags: Cap rate, cash flow, cash cash investment property real estate, real back to estate investment

This entry posted, on Thursday, August 20th, 2009 at 9: 27 am and is filed under real estate investment news. You can feed follow any responses to this entry through the RSS 2.0. You can leave a response, or trackback from your own site.

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