91 terms found
An investor sells a rental for $500,000 (basis of $300,000) and uses a 1031 exchange to buy a $600,000 property, deferring the $200,000 gain.
Absorption Rate = Sales per Month / Total Active Listings
A market with 600 active listings and 100 sales per month has a 6-month supply (600 / 100). An absorption rate over 20% suggests a seller's market.
ARV = Average Adjusted Comp Price (based on 3-5 comparable sales)
Three recently renovated comps sold for $280K, $295K, and $305K. The average adjusted value is $293,333, so the subject ARV is approximately $293,000.
A 30-year mortgage at 6% starts with ~83% of the first payment going to interest. By year 15, the split is roughly 50/50.
An interest rate increase from 6.50% to 6.75% is a 25 basis point (bps) increase.
An investor sells for $500,000 and buys a replacement for $450,000 in a 1031 exchange. The $50,000 difference is boot and is subject to capital gains tax.
BER = (Operating Expenses + Debt Service) / Gross Operating Income
Operating expenses $20,000, debt service $30,000, gross income $60,000. BER = ($20,000 + $30,000) / $60,000 = 83.3%.
A $12,000 roof replacement is a CapEx item, while a $200 gutter cleaning is an operating expense (OpEx).
Capital Gain = Sale Price - Selling Costs - Adjusted Basis
Cap Rate = NOI / Property Value
A property generates $48,000 in annual NOI and is valued at $600,000. Cap Rate = $48,000 / $600,000 = 8.0%.
Cash-on-Cash = Annual Pre-Tax Cash Flow / Total Cash Invested
An investor puts $80,000 cash into a rental that produces $9,600/yr in pre-tax cash flow. Cash-on-Cash = $9,600 / $80,000 = 12%.
Buyer closing costs typically range from 2-5% of the purchase price; seller costs range from 6-10% (including agent commissions).
CLTV = (First Mortgage + Second Mortgage + ... ) / Property Value
Property worth $500,000 with a $350,000 first mortgage and a $50,000 HELOC. CLTV = ($350,000 + $50,000) / $500,000 = 80%.
Adjusted Basis = Purchase Price + Capital Improvements - Accumulated Depreciation
A $1M building undergoes cost segregation. 20% is reclassified as 5-year property, 10% as 15-year property, generating $80,000+ in first-year deductions versus $36,364 under straight-line.
DSCR = NOI / Annual Debt Service
NOI is $60,000/year and annual mortgage payments total $48,000. DSCR = $60,000 / $48,000 = 1.25x.
Debt Yield = NOI / Loan Amount
NOI of $75,000 with a $750,000 loan. Debt Yield = $75,000 / $750,000 = 10%.
DTI = Total Monthly Debt Payments / Gross Monthly Income
Monthly debts total $2,800 and gross monthly income is $8,000. DTI = $2,800 / $8,000 = 35%.
Annual Depreciation = Depreciable Basis / Useful Life (27.5 or 39 years)
A residential rental with a $275,000 depreciable basis yields $10,000/yr in depreciation deductions ($275,000 / 27.5).
A buyer submits a $5,000 earnest money deposit on a $300,000 purchase, representing approximately 1.7% of the purchase price.
Equity = Property Value - Outstanding Mortgage Balance(s)
A property worth $350,000 with a $220,000 mortgage balance has $130,000 in equity.
Equity Multiple = Total Distributions / Total Equity Invested
An investor contributes $100,000 and over 5 years receives $50,000 in cash flow plus $170,000 at sale = $220,000 total. Equity Multiple = $220,000 / $100,000 = 2.2x.
GRM = Property Price / Annual Gross Rent
A property priced at $300,000 with $36,000/yr gross rent has a GRM of 8.3.
0 = Sum of [ CF_t / (1 + IRR)^t ] for t = 0 to n
An investor puts $100,000 into a deal, receives $10,000/yr for 5 years, and sells for $130,000 at the end. The IRR that zeroes out the NPV is approximately 14.2%.
An investor buys a $400,000 property with $80,000 down (5x leverage). If the property appreciates 10% ($40,000), the ROI on cash invested is 50% ($40,000 / $80,000).
LTV = Loan Amount / Property Value
A property is worth $400,000 and the loan is $300,000. LTV = $300,000 / $400,000 = 75%.
MAO = ARV * 0.70 - Estimated Repair Costs
ARV is $300,000 and repairs are estimated at $40,000. MAO = ($300,000 * 0.70) - $40,000 = $170,000.
NOI = Gross Rental Income - Vacancy Loss - Operating Expenses
Gross rent is $5,000/mo ($60,000/yr), vacancy loss is $3,000/yr, operating expenses are $18,000/yr. NOI = $60,000 - $3,000 - $18,000 = $39,000.
NPV = Sum of [ CF_t / (1 + r)^t ] - Initial Investment
Discount rate is 8%. Cash flows of $12,000/yr for 5 years plus $150,000 sale proceeds. NPV = present value of all inflows minus the $120,000 initial cost.
OER = Operating Expenses / Gross Operating Income
Operating expenses of $22,000 on gross income of $55,000 yields an OER of 40%.
PMT = PV * [ r(1+r)^n ] / [ (1+r)^n - 1 ]
A $250,000 loan at 6.5% for 30 years has a monthly payment of approximately $1,580.
ROI = (Net Profit / Total Investment) * 100
Total investment of $50,000 generates $7,500 in annual net profit. ROI = ($7,500 / $50,000) * 100 = 15%.
If the 10-year Treasury yields 4.2% and the lender quotes 6.7%, the spread is 250 basis points (2.50%).
Vacancy Rate = Vacant Units / Total Units (or Vacant Months / 12)
A 10-unit building with 1 unit vacant has a 10% vacancy rate.