Investment Terminology
Basic Investment Terms
C.A.M. Charges – Common Area Maintenance.
Cap Ratio (higher is better) – Rate of return on sales. Price: (N.O.I. divided by sales price).
Cash Flow – (Net Operating Income minus debt service).
Debt Service – Mortgage payments.
Debt Coverage Ratio – (N.O.I. divided by debt service) typical minimum 1.25.
Depreciation – (Sales price x 85% ÷27.5 or 39 years).
Estoppel Agreement – Tenant signs statements stating that no verbal agreements exist between tenant and landlord applying to lease agreement.
Global Debt Coverage Ratio – (N.O.I. + guarantors income ÷ debt service and guarantors debt).
G.O.I. – Gross Operating Income (SGI less vacancy).
G.R.M. – Gross Rent Multiplier (Sales price divided by SGI).
* Number of years to make money back
* Doesn’t take into account vacancy or expenses
* Lower the better
L.T.V. - Loan to Value
Max Debt – (N.O.I. divided by debt coverage ratio (DCR)).
N.N.N. (Triple Net) – Tenant pays taxes and utilities for operating a property.
N.O.I. – Net Operating Income (S.G.I. less vacancy and expenses).
Overage – Tenant pays agreed-to-percent of gross sales volume over agreed to base sales volume.
R.O.E. – Return on Equity. Return to value of property less balances, (Cash Flow ÷ Equity).
R.O.I. – Return on investment. Rate of return on down payment. (Cash flow divided by down payment).
S.G.I. (Rents) – Schedule Gross Income (Income before vacancy and expenses (annual)).
Tax Stop – Tenant pays increase on real property taxes.
Vacancy – 5% of G.O.I.
Value – (N.O.I. divided by Cap Rate) (SGI x GRM).