Cash on Cash Glossary

• Cash Flow

  NOI minus debt service; the numerator

• Down Payment

  Cash paid toward the price; the largest item in cash invested

• Property Investment Calculator

  Tool that computes cash on cash, cap rate, GRM, NPV and IRR

• Closing Costs

  Fees paid at purchase; part of cash invested

• Leverage (Finance)

  Using borrowed money to control a larger asset

• Capitalization Rate

  NOI divided by price; the unlevered counterpart

• Net Operating Income (NOI)

  Income after operating expenses, before debt

• Mortgage

  The loan whose payments are subtracted from NOI

• Amortization Calculator

  Computes the loan payment and its principal-interest split

• Internal Rate of Return (IRR)

  Annual return over the full holding period, sale included

• Rate of Return

  Gain or loss on an investment as a percent of its cost

• Return on Investment (ROI)

  Gain divided by cost; the broader measure

• Return on Equity (ROE)

  Corporate analogue: profit divided by shareholders' equity

• Real Estate Investing

  Buying property for income and appreciation

• Loan-to-Value Ratio (LTV)

  Loan as a share of price; sets the denominator

• Return of Capital

  Getting your own money back, not income

• Mortgage Constant

  Annual debt service as a share of the loan

• Debt Service Coverage Ratio (DSCR)

  NOI divided by debt service; the lender's view

• Capital Appreciation

  Increase in the property's value; excluded from cash on cash

• Depreciation

  Tax deduction for the building's cost over 27.5 years

• Gross Rent Multiplier (GRM)

  Price divided by annual gross rent; the quick screen

• Net Present Value (NPV)

  Present value of future cash flows minus cost today