Rental Property's Financial Indicators
These are insdustry standard indicators for rental properties
used when investing in rental and income producting properties.
Break Even Ratio
The break-even ratio is an indicator used by lenders when underwriting investment properties; its purpose is to estimate how vulnerable a property
is of defaulting on its debt should rental income decline.
Capitalization Rate
The capitalization rate allows investors to measure the earning ability of a rental property. It is a ratio between a property's net operating income and it's purchase price.
Cash On Cash Return
The cash on cash return is a percentage that measures the return on the cash invested in the first year of the investment.
Debt Coverage Ratio
The debt coverage ratio indicator finds out whether the property generates enough money to cover the debt for one year.
Gross Rent Multiplier
The gross rent multiplier (GRM) is a screening metric used by investors to compare rental property opportunities in a given market. The GRM functions as
the ratio of the property’s market value over its annual gross rental income.
Internal Rate of Return
The internal rate of return (IRR) measures the profitability of a potential investment based on its predicted future cash flows.
Loan To Value Ratio
The loan-to-value (LTV) is a ratio between the loan balance and the market value of a property expressed as a percentage.
The LTV can be used to estimate the amount of equity you have in a property.
Net Cash Flow
The net cash flow is an indicator that calculates the net cash flow of the property.
Profitability Index
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