Financial Glossary
A quick reference guide for the real estate and financial terms used throughout our Deal Analyzer and platform.
Pro Forma Analysis
A financial model projecting a property's future cash flow and profitability based on estimated revenue and expenses.
Stabilized Pro Forma
A projection based on the property operating at its full, stabilized potential (e.g., at market rent with normal vacancy rates) rather than its current state.
Net Operating Income (NOI)
A calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property minus all reasonably necessary operating expenses (excluding mortgage payments).
Capitalization Rate (Cap Rate)
The expected rate of return on a real estate investment property assuming it was bought with all cash. Calculated as Annual NOI divided by the Purchase Price.
Return on Investment (ROI)
A performance measure used to evaluate the profitability of an investment. It compares the total returns (cash flow, equity paydown, tax savings, appreciation) to the total cash initially invested.
Cash on Cash Return
A rate of return that calculates the cash income earned strictly on the cash invested in a property. Calculated as Annual Net Cash Flow divided by Total Cash Needed.
Debt Coverage Ratio (DCR)
Also known as Debt Service Coverage Ratio (DSCR). It measures a property's ability to pay its debt obligations based on its cash flow. Calculated as Annual NOI divided by Annual Debt Service (mortgage payments).
Gross Rents
The total amount of rent collected from tenants before any expenses, vacancies, or management fees are deducted.
Loan to Value Ratio (LTV)
A financial term used by lenders to express the ratio of the loan amount to the total purchase price of the property.
Vacancy Reserve
A percentage of gross rent set aside to account for the expected time a unit will sit empty between tenants.
Maintenance Reserve
A percentage of gross rent budgeted and saved each month for ongoing repairs and future capital expenditures.
Marginal Tax Rate
The tax bracket that applies to your top dollar of income, used in our calculator to estimate the tax savings generated by depreciation and mortgage interest deductions.
Ready to run the numbers?
Now that you know the terminology, put it into practice by analyzing your first property.