Real Estate Investment Basics

Vocabulary flashcards covering key real-estate investment metrics, strategies, property types, and analysis concepts.

Pro Forma

A forward-looking budget for a property that projects future income, expenses, and profit.

Discounted Cash Flow (DCF)

A valuation method that discounts future cash flows back to today to show their present worth.

Cap Rate

The ratio of a property’s Net Operating Income to its purchase price, expressed as a percentage.

Internal Rate of Return (IRR)

The average annualized return an investment generates, accounting for the timing of cash flows.

Return on Investment (ROI)

The total gain or loss on an investment divided by the initial amount invested, expressed as a percentage.

Cash-on-Cash Return

Annual pre-tax cash earned from a property divided by the actual cash invested.

Equity Multiple

A metric showing how many times an investor gets their original equity back over the life of an investment.

Core Strategy

Low-risk real estate investment focused on fully leased, stable properties providing steady income.

Core-Plus Strategy

Slightly higher-risk approach involving stable assets that may need light upgrades for income growth.

Value-Add Strategy

Medium-risk investment in properties requiring significant improvements to boost income and value.

Opportunistic Strategy

High-risk, high-reward investing in projects needing major repositioning, development, or turnaround.

Residential Property

Real estate used for housing, such as apartments or single-family homes.

Commercial Property

Income-producing real estate like offices, retail centers, warehouses, or hotels.

Mixed-Use Property

A development combining residential and commercial spaces, e.g., apartments above street-level stores.

Market Analysis (Real Estate)

The study of supply, demand, vacancy, and rents to evaluate a market’s investment potential.