HARRISONBURG HOMEOWNER
  • Blog
  • Sell a Home
  • Find a Home
    • Buying Guide
    • New Listings
  • Contact
  • Lakewood Estates
    • Active Listings
    • Plats and Covenants
  • Kiva Program

The Top 10 Terms of Commercial/Investment Real Estate

2/7/2017

0 Comments

 
Picture
Welcome to the list of the top 10 terms used in commercial/investment real estate.  If you are thinking of getting into investing and/or commercial real estate.  It will help to familiarize yourself with these terms as they are used frequently in the field. 

The following is a summary.  Click on the terms to get examples and more detailed definitions.  



1.  Gross Income $

Gross income is all of the income that you make on a property.  This includes rent, laundry, storage fees, late fees, vending machines, etc. 


2.  Vacancy $

Any unit that is not occupied and not producing income is considered a Vacancy.  Keep in mind that if a unit changes tenants in the same month, it is considered a turnover, not a vacancy. 


3.  Vacancy Rate %

This is the number of vacancies divided by the total number of units. 

                                                          Vacancies    
                                                         Total Units


4.  Effective Gross Income $

Effective gross income is a number that takes into account what you will be making with vacancies.  

Income - (Vacancy Rate (%) x Income) = Effective Gross Income


5.  Operating Expenses $

The total annual expenses of an investment; including taxes, insurance, utilities, management fees, landscaping, maintenance, repairs, and advertising. 


6.  Net Operating Income (NOI) $

To get the NOI, take the Gross Income and subtract it by the Operating Expenses.

Effective Gross Income -  Operating Expenses = NOI


7.  Debt Service $

Debt Service is the annual cost of your mortgage. 

Monthly Mortgage Amount x 12 = Debt Service


8.  Cash Flow $

Most buy and hold real estate investors agree that cash flow is the ultimate goal.  To calculate cash flow, you take the NOI and subtract it by the Debt Service.

NOI - Debt Service = Annual Cash Flow


9.  Cash-on-Cash Return %

Cash-on-Cash Return is what you would use to compare your investment to other types of investments, like stocks.  To calculate Cash-on-Cash Return, take the Annual Cash flow and divide it by the Down Payment amount. 

                                                     Annual Cash Flow   
                                                       Down Payment


10.  Capitalization Rate %

AKA Cap Rate, shows how well the investment performs if you pay all cash.  To calculate a Cap Rate, you take the Net Operating Income and divide it by the Sales Price. 
 
                                                                 NOI        
                                                           Sales Price






Source:  Commercial Real Estate for Beginners: The Basics of Commercial Real Estate Investing.  By Peter Harris
0 Comments



Leave a Reply.

    RSS Feed

    Categories

    All
    Appraisal
    Association Fee
    Backyard Fire
    Bank Owned Homes
    Best Of Harrisonburg
    Best Of The Valley
    Bidding War
    Broadway
    Bubble
    Buyer Profiles
    Buying
    Cash
    Closing Costs
    Commercial
    Coronavirus
    Deferral
    Depreciation
    Development
    Down Payment
    Featured Listings
    First Time Homebuyer
    Flipping Real Estate
    Forbearance
    FSBO
    Getting Ready To List
    GIS
    Harrisonburg
    Home Inspection
    Home Preperation
    Inventory
    Investment
    JMU
    Key Terms
    Kitchen
    Land
    Loan Commitment
    Local Guide
    Map
    Marketing
    Market Report
    Massanutten
    Mortgage
    Moving
    National Statistics
    Negotiations
    New Construction
    Office
    Organizing
    Penn Laird
    PMI
    Preston Lake
    Recasting
    Refinance
    REI
    Relocation
    Remodeling
    Rental
    Rockingham
    Safety
    Sales Forecast
    School District
    Search
    Sellers Market
    Selling
    Settlement
    Staging
    Tax
    Timberville
    Title Insurance
    Township
    TRID
    Utility Costs
    Utilty
    Video
    Virtual Reality
    Weekly Report
    Zillow

Picture
Picture
Email - Click Here
Phone - 540-246-9067
Website - www.mattiasclymer.com
​Schedule a Showing, Meeting, Etc...

Funkhouser Real Estate Group  |  401 University Boulevard, Harrisonburg, VA 22801  |  540-434-2400  |  ©2021  |  Privacy Policy  |  All rights reserved.

Licensed in the Commonwealth of Virginia
  • Blog
  • Sell a Home
  • Find a Home
    • Buying Guide
    • New Listings
  • Contact
  • Lakewood Estates
    • Active Listings
    • Plats and Covenants
  • Kiva Program