This glossary covers financial metrics used in real estate investment analysis.
Return Metrics
ROI (Return on Investment)
Net profit divided by total investment, expressed as percentage. Formula: (Net Profit / Total Investment) × 100
IRR (Internal Rate of Return)
Annualized return accounting for timing of all cash flows. More sophisticated than simple ROI.
Cash-on-Cash Return
Annual cash flow divided by total cash invested. Formula: Annual Cash Flow / Cash Invested
Annualized Return
Return expressed as yearly rate, enabling comparison across different holding periods.
Income Metrics
NOI (Net Operating Income)
Gross income minus operating expenses, before debt service. Formula: Gross Income - Operating Expenses
Cap Rate (Capitalization Rate)
NOI divided by property value. Formula: NOI / Property Value Used to compare income properties.
Gross Yield
Annual rental income divided by property price. Formula: Annual Rent / Property Price
Net Yield
Annual rental income minus expenses, divided by property price. Formula: (Annual Rent - Expenses) / Property Price
Cost Metrics
Acquisition Cost
Total cost to purchase property: price plus transaction costs.
All-In Cost
Total investment including purchase, renovation, holding, and transaction costs.
Cost Per Square Foot
Total cost divided by property size.
Value Metrics
ARV (After Repair Value)
Estimated property value after renovation completion.
LTV (Loan-to-Value)
Loan amount divided by property value. Formula: Loan Amount / Property Value
Equity
Property value minus outstanding debt. Formula: Property Value - Debt
Profitability Metrics
Gross Profit
Sale price minus purchase price.
Net Profit
Sale proceeds minus all costs (acquisition, renovation, holding, transaction).
Profit Margin
Net profit divided by sale price. Formula: Net Profit / Sale Price
Understanding these metrics enables accurate investment analysis and comparison.
