Wednesday, March 14, 2007
Investing Terms
Terms you need to know before buying investment property:
Vacancy rate-The percentage of the total number of units or space vacant of the total available.
Net operation income (NOI) The potential rental income plus other income, less vacancy and operating expenses.
Net present value (NPV) The sum of all future cash flows discounted to present value and netted against the initial investment. There are present value tables that can be useful in this calculation.
Capitalization rate- A percentage that relates the value of an income-producing property to it's future income divided by the purchase price.
Exchange- Be familar with the Section 1031 exchange of the internal revenue code where you can trade like kind property and defer capital gains taxes.
Sale/leaseback- A strategy in which a property owner sells the property to an investor and leases it back thereby freeing up some capital.
Vacancy rate-The percentage of the total number of units or space vacant of the total available.
Net operation income (NOI) The potential rental income plus other income, less vacancy and operating expenses.
Net present value (NPV) The sum of all future cash flows discounted to present value and netted against the initial investment. There are present value tables that can be useful in this calculation.
Capitalization rate- A percentage that relates the value of an income-producing property to it's future income divided by the purchase price.
Exchange- Be familar with the Section 1031 exchange of the internal revenue code where you can trade like kind property and defer capital gains taxes.
Sale/leaseback- A strategy in which a property owner sells the property to an investor and leases it back thereby freeing up some capital.
