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Real Estate Terms, Explained
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ROI
Return on investment: total gain (rent plus price growth, minus costs) divided by what you put in.
Gross Yield
Annual rent divided by property price, before any costs.
Net Yield
Annual rent minus running costs, divided by property price.
Cap Rate
Net operating income divided by property value — a quick way to compare income properties.
Cash-on-Cash
Yearly cash flow after mortgage, divided by the cash you actually invested.
IRR
Internal rate of return: the yearly rate that makes all future cash flows worth your investment today.
NPV
Net present value: today's value of future cash flows minus the upfront cost.
LTV
Loan-to-value: your loan as a percentage of the property's value.
NOI
Net operating income: rent minus operating costs, before mortgage payments.
Freehold
You own the property and the land outright, indefinitely.
Leasehold
You own the right to use the property for a fixed number of years.
Stamp Duty
A government tax paid when buying property; rates vary by country and buyer type.
Vacancy Rate
The share of time a rental sits empty without a tenant.
Capital Gains
Profit made when you sell for more than you paid; often taxed.