Resources - Financial Terms
- Activity Loss - Debt Coverage Ratio
The Internal Revenue Service views the income from rental properties as passive income and applies special passive-activity-loss rules to that income.
- Capitalization Rate
Appraisers use the Income Approach, Cost Replacement and Market Comparison methods to estimate the value of property. The Income Approach utilizes the theory of Capitalization.
- Cash on Cash
Cash-on-Cash return is a percentage that measures the return on cash invested in an income-producing property. It is calculated by dividing before-tax cash flow by the amount of cash invested.
- Compare-Loans
Choose the best loan for your property. Compare two loans with this calculator to determine your overall savings.
- Debt Coverage Ratio
The Debt Coverage Ratio (DCR) is a benchmark which measures an income producing property's ability to cover the monthly mortgage payments. The DCR is calculated by dividing the net operating income (NOI) by a property's annual debt service.
- Depreciation
Depreciation is the loss in value of an asset or building over time due to wear and tear, physical deterioration and age. The IRS allows you to depreciate income producing properties over their useful life, which is determined by law. Current law requires that residential-income properties must be depreciated over 27.5-years and commercial-income properties over 39 years.
- Discounted Cash Flows
Discounted Cash Flows, also known as Net Present Value of Discounted Cash Flows, is a valuation method which discounts future cash flows back to the present to estimate the attractiveness of a real estate investment.
- Home Equity Loans
Enter your loan information below and receive the details of your home equity loan. If you know the loan terms you are eligible for, enter them in the calculator and click on the next cell, or the update button, to receive your home equity loan data.
- Income Approach, Sales Comparison Approach, Cost Approach
Appraisers use three different methods to estimate the value of real estate. They are the income approach, the sales comparison approach and the cost approach. The sales comparison approach is considered the best method for appraising single family homes. The cost approach is used to appraise special purpose buildings such as churches, schools and public buildings. The income approach is used to estimate the market value of income producing properties such as office buildings, warehouses, apartment buildings and shopping centers. When adequate financial data for recent sales of similar income producing properties is unavailable appraisers may utilize all three approaches.
- Internal Rate of Return, Net Present Value, Discount Rate and Discounted Cash Flow
The Internal Rate of Return (IRR) is the interest rate received for an investment consisting of expenses (negative values) and income (positive values) that occur at regular periods. IRR measures the average annual yield on an investment. For an income-producing property, the IRR calculation uses the initial amount invested in the property, a series of projected after-tax cash flows and a projected after-tax sales proceeds amount in a given year.
- Loan Services - Compare and Save
Choose the best loan for your property. Compare four loans and determine your monthly payments with this calculator.
- Loan-to-Value Ratio
The Loan-to-Value Ratio (LTV) is calculated by dividing the loan balance of a property by the market value and is expressed as a percentage.
- Net Income Multiplier
The Net Income Multiplier (NIM) is a factor used to estimate the market value of income-producing properties. It is equal to the market value of a property divided by the net operating income or NOI.
- Net Operating Income
Net Operating Income (NOI) is equal to a property's yearly gross income less operating expenses. Gross income includes both rental income and other income such as parking fees, laundry and vending receipts, etc.
- Operating Expense Ratio
The Operating Expense Ratio (OER) is the ratio between the total operating expenses and the effective gross income.