Cap rateNet operating income divided by purchase price. It measures the property's unlevered income yield before debt.
NOINet operating income: property income after vacancy and operating expenses, but before mortgage payments, income taxes, depreciation, and major capital projects.
EGIEffective gross income: scheduled rent and other income after accounting for vacancy and collection loss.
DSCRDebt-service coverage ratio: NOI divided by annual loan payments. A result above 1.00x means NOI exceeds scheduled debt service.
Cash-on-cashCash-on-cash return: annual pre-tax cash flow divided by the investor's initial cash invested.
IRRInternal rate of return: the annualized return that considers the timing of all projected cash flows and sale proceeds.
Equity multipleTotal cash distributions and sale proceeds divided by the original equity invested. It does not show how long the return took.
LTVLoan-to-value: loan amount divided by property value or purchase price.
Debt yieldNOI divided by loan amount. Lenders use it to evaluate property cash flow without relying on interest rate or amortization.
Break-even occupancyThe occupancy level where property income exactly covers operating expenses and scheduled debt payments.
Exit cap rateThe capitalization rate assumed when estimating the property's resale value at the end of the hold period.
AmortizationThe repayment schedule used to calculate principal and interest payments. A longer period generally lowers scheduled payments.
Interest-onlyA period when scheduled payments cover interest but do not reduce the loan principal.
Replacement reservesMoney set aside for predictable replacements such as roofs, HVAC systems, appliances, paving, or unit turns.
Capital expendituresCapital expenditures: larger investments that repair, replace, or improve long-lived building components rather than routine maintenance.
T-12Trailing 12-month statement: the property's actual income and expenses for the most recent 12 months.
Rent rollA unit-by-unit schedule showing tenants, lease dates, rents, deposits, vacancies, and sometimes balances due.
Phase I ESAPhase I environmental site assessment: a records review and site inspection for potential environmental contamination. It usually does not include sampling.
Property condition assessmentProperty condition assessment: a professional review of building systems and likely near-term repair or replacement needs.
Investment basisThe all-in amount invested in the property, often including purchase price, closing costs, and improvements.
Visual condition assessmentA preliminary review of visible photo evidence. It cannot reveal concealed damage, test operation, confirm code compliance, or replace an onsite inspection.
Remaining useful lifeThe estimated period a component may remain serviceable before major repair or replacement. Actual life depends on age, installation, use, climate, and maintenance.
Planning allowanceA preliminary repair budget range used for underwriting. It is not a contractor quote and should be replaced with local bids during due diligence.
Trailing cap rateTrailing cap rate uses verified historical NOI, commonly the most recent 12 months, divided by purchase price.
Stabilized yield on costStabilized yield on cost divides projected stabilized NOI by total project cost: purchase price, closing costs, improvements, leasing costs, and due-diligence costs.
Cap-rate spreadThe difference between the property cap rate and borrowing rate, shown in basis points. It is a comparison—not a complete measure of leverage risk.
Weighted average lease termWeighted average lease term: the average remaining lease term weighted by tenant rent or occupied area.
Expense recoveriesTenant reimbursements for operating expenses such as taxes, insurance, utilities, or common-area maintenance.
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