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Property investment is becoming more and more popular, but for a beginner it can sometimes be hard to understand the ins and outs of the industry and many of the terms associated with it. Investment in real estate with a view to renting out a property is a great way to generate income and make a profit, but it’s crucial to note that one of the most important factors is the location. With that in mind, Rochester, NY, is an excellent place to consider, with its pleasant weather, sophisticated infrastructure and affordable cost of living. Whilst enlisting a reputable, professional property management company in Rochester will ensure that all the legal aspects of your investment are taken care of, it’s helpful for beginners to understand the fundamentals of some basic property investment terms, in order to feel more confident in the specifics of the industry. Below are some of the typical terms that might cause some confusion. Gross Yield: Often presented as a percentage figure, this relates to the total income generated from the premises, divided by the price paid for it and any other associated costs. Cap Rate: Cap rate is employed to measure the annual return rate on an investment, and is based on the profit the asset is anticipated to make. It’s calculated by dividing the net operating income (NOI) by the price of purchase. Cash-on-Cash Return: This figure measures the annual return compared to how much money is put down, and is calculated by dividing annual cash amount (before tax) by the complete amount of cash invested. Like the cap rate, it can be used to analyse the investment by honing in on the returns depending on the cash invested. Net Operating Income: This is determined by approximating the revenue of a premises after subtracting any operating expenses, excluding any mortgage payments. NOI measures the investment property’s prospective yield. Cash Flow: Classed into negative or positive, depending on whether you end up spending more or less money than you make each month, cash flow is the total amount of money made at the end of the month once all other expenses and loans are paid off. Appreciation and Depreciation: When a property increases in value over time, it is called appreciation. If it decreases in value, it is referred to as depreciation. Either of these can happen due to fluctuations in interest or inflation, and even because of changing levels of demand and supply. These estimated amounts are useful to measure the increase or decrease in a property over a specific period of time. Whilst there are plenty more terms you’ll come across in the industry, these basic ones will help you if you’re thinking of delving into the first stages of property investment. However, it’s still vital to enlist the services of a professional property manager to take care of your assets and guide you. Being confident in both your own knowledge and your management company will help you to flourish. Author Plate Danny Torres is from Torres Turn Key, a property management company in Rochester NY with more than ten years’ experience providing a holistic service for both domestic and international investors. When it comes to property investment, Rochester NY is one of the most exciting areas to invest in both commercial and residential properties. The company brings together a host of experience and specialist knowledge to build long-term relationships and create maximum value and benefit for their customers.
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