Definition: Income remaining after all operating expenses but before financing and taxes.

Use: The foundation for valuing income-producing real estate and determining returns.

Definition: The ratio between a property's NOI and its market value.

Use: Indicates unleveraged yield and risk level in the market.

Definition: The discount rate that sets the net present value (NPV) of all cash flows to zero.

Use: Measures the project's overall return, accounting for timing of cash flows.

Definition: The percentage return on the total amount invested.

Use: Quick snapshot of profitability; useful for comparing projects.

Definition: The ratio of the loan amount to the property's appraised value or contract sales price, whichever is less.

Use: Indicates leverage level and lender risk exposure.

Definition: Compares net operating income to annual debt service.

Use: Lenders use this to gauge a property's ability to meet loan payments. Typically must be 1.20 or greater, depending on lender's underwriting requirements.

Definition: Measures annual pre-tax cash flow as a percentage of cash invested.

Use: Evaluates income yield relative to invested capital.

Definition: Valuation method discounting projected future cash flows to present value using a required rate of return.

Use: Core method for estimating fair value and investment feasibility.

Definition: The present value of future cash flows minus the initial investment.

Use: Determines whether an investment adds or subtracts value at a given rate.

Definition: Variation of IRR that assumes reinvestment at a specific rate.

Use: Provides a more realistic return estimate when reinvestment rates differ.