Financial Modelling

What is the IRR?

The discount rate for which the NPV of a project is zero

What is the NPV?

The surplus/deficit of discounted cashflows against a discount rate (typically the required rate of return)

What is the equivalent yield?

A weighted average return combining current and future rents into a single discount rate

What is indirect investment?

Investing via a vehicle (REITs, property companies, ETFs) rather than owning the individual asset

What are pros and cons of indirect investment over direct investment?

Indirect investment gives greater diversification and liquidity buy may give higher fees and less control over assets

What is secondary investment?

Buying an existing investor’s interest in a property. Secondary investments usually allow for purchase at a discount and shorter investment horizons but also may have due diligence challenges