Is a measure of your annual Cash Outflow as a percentage of the loan amount. It is calculated as Annual Loan Payment/Loan Amount
Annual Spread %
Cap Rate – Loan Constant
Annual Spread $
Cash inflow – Cash Outflow
Unleveraged Return
Calculated by Net Operating Income divided by Cash Required to Close. It is important to compare your Unleveraged Return to Leverage return to determine if you have Positive Leverage (ideal), Neutral Leverage or Negative Leverage.
PMI
Mortgage Insurance if required
Effective Return on Investment
This is similar to Cash on Cash Return but also includes appreciation, and mortgage principal paydown to illustrate a more complete return.
Cash on Cash Return
An annual measure of a real estate investor’s earnings on a property compared to the amount the investor initially spent to purchase it and make it operational.
Your cash-on-cash return is your annual cash flow (pre-tax) divided by your total cash investment.
Capitalization Rate
Calculated by dividing a property’s net operating income by its asset value, the cap rate is an assessment of the yield of a property over one year. For example, a property worth $14 million generating $600,000 of NOI would have a cap rate of 4.3%. That means that you can expect a roughly 4.3% annual operating cash flow given the price paid for the property.
Gross Rent Multiplier
is a screening metric used by investors to compare rental property opportunities in a given market against each other. The GRM functions as the ratio of the property’s market value over its annual gross rental income.
Debt Coverage Ratio
is a metric that looks at a property’s income compared to its debt obligations. Properties with a DCR of more than 1 are considered profitable, while those with a DSCR of less than one are losing money.
Other
Any other costs you will be covering for the property. i.e. if you are going to pay for the pool maintenance then the Gross rent would be higher but you would include that cost here.
Maintenance Percentage
What do you anticipate it will cost per year to maintain the home from a Landlords perspective? Older homes will be higher than newer homes.
Real Estate Appreciation
What do you anticipate the property appreciating annually?
Closing/Fixup/Misc Costs
Include all Buyer costs at closing AND the cost you will put into the property after closing to get it ready to rent.