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Real Estate & Mortgages

Property maths: mortgage payments, LTV, cap rate, rental yield, ROI and price per area

Mortgage Monthly Payment (EMI)

NEWIntermediate
M=Pr(1+r)n(1+r)n1M = P\frac{r(1+r)^n}{(1+r)^n - 1}

Fixed monthly repayment on a mortgage.

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Loan-to-Value Ratio

NEWBasic
LTV=LV×100LTV = \frac{L}{V} \times 100

Loan size as a percentage of property value.

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Capitalisation Rate

NEWIntermediate
CR=NOIV×100CR = \frac{NOI}{V} \times 100

Annual return on a property from net operating income.

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Gross Rental Yield

NEWBasic
Y=12RV×100Y = \frac{12 R}{V} \times 100

Annual rent as a percentage of property price.

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Net Operating Income

NEWBasic
NOI=GIOENOI = GI - OE

Rental income minus operating expenses.

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Price per Square Metre

NEWBasic
p=VAp = \frac{V}{A}

Property price divided by floor area.

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Return on Investment

NEWBasic
ROI=GainCost×100ROI = \frac{Gain}{Cost} \times 100

Profit as a percentage of money invested.

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Cash-on-Cash Return

NEWIntermediate
CoC=ACFIcash×100CoC = \frac{ACF}{I_{cash}} \times 100

Annual cash flow relative to actual cash invested.

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Debt Service Coverage Ratio

NEWIntermediate
DSCR=NOIDDSCR = \frac{NOI}{D}

Whether rental income covers the loan payments.

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Affordability (28% Rule)

NEWBasic
Mmax=0.28×IM_{max} = 0.28 \times I

Recommended maximum housing payment from gross income.

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Total Mortgage Interest

NEWIntermediate
I=(M×n)PI = (M \times n) - P

Total interest paid over the life of a loan.

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Property Appreciation

NEWBasic
Vn=V0(1+g)nV_n = V_0 (1 + g)^n

Future value from an annual appreciation rate.

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After-Repair Value Rule (70%)

NEWAdvanced
Omax=0.7ARVCrO_{max} = 0.7\, ARV - C_r

Max purchase price for a flip using the 70% rule.

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Break-Even Occupancy

NEWAdvanced
BE=OE+DGPIBE = \frac{OE + D}{GPI}

Occupancy needed to cover expenses and debt.

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