Five terms you need to know when owning an investment property

Below, we've compiled five key terms you need to know when owning an investment property.

Rental Yield:

A rental yield measures the profit investors generate each year from their properties as a percentage of its value. Achieving a high rental yield means a greater cash flow.

It is important to remember that there are two types of rental yields: net and gross.

1. Net yield is calculated by inducing all expenses involved.

2. Gross yield is calculated through annual rental income and property value.

Gross Rental Income:

Gross income is the amount investors have collected in rent and any other funds from their property. The gross amount is the amount of income you have received before deducting any expenses including maintenance, insurance, taxes, advertising and Property Management costs.

Return on Investment (ROI):

Return on investment details the profit made on an investment. ROI is calculated as a percentage of the cost of that investment. Using their ROI, investors can see whether putting money into a property is beneficial.

Net Operating Income (NOI):

Net Operating Income is a calculation used to ascertain the profitability of your investment property before tax.

Capital Gain:

Capital gain is the increase of a property’s value when it is sold. A capital gain can be short-term (one year or less) or long-term (more than a year) and must be claimed on your income taxes.