Buyers Advisory

Investors Terms:

1) Cap (Capitalization Rate). Return based on a cash purchase. Net Income/Sales Price


2) ROI or C/C: Return on Investment or Cash-on-Cash return. Net Income (after paying all expenses including mortgage) divided by Initial Investment (Down payment + closing costs).


3) IRR: (Internal Rate of Return). Overall return on Investment over the period of ownership. Figures out the overall profit, including all  annual cashflow (positive or negative) and after sales profits. This  method is the best way to figure your return, but it is the most difficult  to calculate because you must plug in many assumptions many of which are extremely hard to predict, if not impossible.