Top Terms Every Condo Investor Should Need to Know
Facts, statistics, figures, calculations; these are some basic investment labels that may confuse potential investors, especially those who are new to the real estate world. Apart from these, there are several other terms related to pre-construction and on-sale condos that may overwhelm investors. It is a wise decision to get familiar with commonly-used terms before embarking on a journey to buy a condo.
Real estate is arguably the best way to make the money work. Investing in a pre-construction condo allows you to enter the landlord’s world in a money-saving way. It comes with a range of benefits, ranging from better price, luxury facilities, and customization.
However, getting a condo isn’t as easy and simple as it seems. There are terms and lingos an investor and savvy condo buyer must be aware of. Here are they:
Return on Investment (ROI)
How does an investment perform? Return on Investment, commonly known as ROI, is a quick and simple way to get the right answer. How does it work?
Return on Investment (ROI) = (Investment Gain minus Investment Cost) divided by Investment Cost
Let’s learn more with an example. Assume you had bought a condo four years ago after paying $350,000 with a 20% down payment. With an annual interest rate of around 5.8%, your condo’s current price will be around $440,000.
Now, if you sell it for $430,000, you can easily calculate how much you earned on the investment.
As the name suggests, pre-construction means under construction. Unlike an on-sale condo, a pre-construction condominium is available before it is fully constructed. There are many advantages of investing in a pre-construction condo, including low prices and freedom of customization.
When you buy a pre-construction condominium, you get a property that won’t be available as a living space for some months or even years. It means when it will be move-in ready, its value would have increased.
Net Operating Income
Popularly called NOI, Net Operating Income is a useful tool that helps calculate whether or not your property is profitable. Although it’s a little more technical than others, one must know it before making an investment. How to calculate NOI?
NOI = Revenue – Expenses
Now, let’s decode the formula with an example. Assume you make a property investment that gives you $30,000 in rent each year. If your expenses (property taxes, insurance, and fees) are around $4,800 a year, then NOI will be $30,000 – $4,800 = $25,200.
The term is an integral part of the real estate world that can help save a huge sum of money each year on townhouses and condos. In a simple manner, refinancing can be defined as negotiating terms or interest rates. It is performed to get on the interest rate and save capital on the next investment.
In the End
These are some common terms that one must know before buying townhouses, pre-construction condos. They may help you make a better decision and save on your investment.