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Knowledge Base · 21 articlesInvestment Dictionary
Every real estate investing term, defined with the math behind it.
Amortization (Loan Paydown)
Every mortgage payment quietly buys back a piece of your property. That's equity you didn't have to write a check for.
APOD (Annual Property Operating Data)
The one-page financial statement of a rental - income at the top, cash flow at the bottom, every deduction visible in between.
Cap Rate
Net operating income divided by price. The speed of the return, before financing.
Cash Flow Shortfall
When collected income doesn't cover expenses plus the mortgage, the difference comes out of your pocket. Size it before it sizes you.
Cash-on-Cash Return
Annual cash flow divided by the cash you actually put in. The return on YOUR money.
Down Payment
The cash you put in up front. It sets your leverage, your payment, your cushion, and most of your risk profile.
DSCR (Debt Service Coverage Ratio)
NOI divided by loan payments. It answers the lender's question - does the property pay its own mortgage, with room to spare?
Effective Rental Income (Vacancy & Credit Loss)
What you'll realistically collect - the theoretical maximum minus empty units and unpaid rent.
Gross Potential Income
The theoretical ceiling - every unit occupied, every rent at market, every dollar collected. Real underwriting starts here and subtracts.
Gross Rent Multiplier
Price divided by gross annual rent. A quick filter, not a full analysis.
Initial Investment
All the cash it takes to start - down payment, closing costs, upfront repairs, reserves. The denominator your returns are judged by.
IRR (Internal Rate of Return)
The annualized return of the whole hold: cash flows, appreciation, and the sale, on a timeline.
LTV (Loan-to-Value Ratio)
Loan amount divided by property value. Lower means more equity and better terms; higher means more leverage and more risk.
Net Cash Flow (Total Cash Flow)
The last line - what's actually left after every expense, operating and not. Positive pays you; negative bills you.
Net Gain on Investment
Everything the deal ever paid you, minus everything you ever put in. The whole story in one number.
NOI (Net Operating Income)
What the property earns after operating costs and before financing. The number underneath cap rate, DSCR, and value.
Non-Operating Expenses
Debt service, income taxes, depreciation, CapEx - real costs that stay out of NOI on purpose.
Operating Expense Ratio (OpEx Ratio)
The share of income that operations consume. Too high signals inefficiency; suspiciously low signals someone's underbudgeting.
Operating Expenses
The recurring costs of running the property. Small assumptions here move NOI more than almost anything else.
Positive Leverage
When the property earns more than the debt costs, borrowed money works for you. When it doesn't, it works against you.
Rental Rate Affordability
Whether the rent you're projecting is one the market's tenants can actually sustain. Paper rent isn't collected rent.