The primary goal of a real estate investor is to achieve the highest possible ROI, which involves balancing income, expenses, and appreciation.
Leverage in real estate involves using borrowed funds to purchase a property, with the aim of increasing the potential return on investment.
Cash-on-cash return measures the annual return the investor makes on the actual cash invested, typically calculated by dividing the annual pre-tax cash flow by the total cash invested.
One of the key benefits of real estate investment is the potential for property appreciation, where the value of the property increases over time, contributing to long-term gains.
The cap rate is used to measure the annual return on an investment property by dividing the net operating income by the property’s purchase price.