The most important real estate terms and how to use them

In the real estate investing world we throw around a lot of terms, but what do they mean and how do you use them?  In this episode, we cover the most useful real estate terms. We break down what they mean, how to calculate them, and when to use them. After this episode, you can hold your own in a real estate discussion with the pros, or look cool dropping jargon bombs on newbie investors!   --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's up everyone? Welcome to another episode of the remote real estate investor. I'm Michael album and today I'm joined by   Emil: Emil Shour.   Michael: And today I'm Neil and I are going to be talking about some of the hot vocab words you may have heard about as a real estate investor, we'd like to sound fancier and smarter than we are. So we use silly fancy words for kind of some everyday things. So we're going to be dissecting those and talking through what they mean and how to use them. So let's get into it.   Alright, Emil, there's like all kinds of fancy words thrown around. People love talking, very high brow as real estate investors very pinky out, if you will. So let's dive into a couple of these. And I'm wondering if we can start with cap rate. And I think it's a very common term that a lot of folks may be familiar with some of our newer listeners might not be so can you give us a definition of what a cap rate is, and how you actually use it when determining whether or not an investment makes sense for you,   Emil: Yessir. So I am. I'm on Roofstock site. And luckily, there's a bunch of, you know, these are calculated on every property listed on the site. And you get a nice little icon next to each one of these that explain what each term means. So I'm just going to read it from the Roofstock site, and then we'll dive into a little bit more.   So the cap rate is the percentage return calculated by dividing net operating income in your one by the property purchase price, your net operating cash flow excludes your loan costs. So cap rate is basically all of your income minus all of your expenses, except for the cost of the loan. So this assumes you're paying all cash, it's useful in comparing properties, apples to apples, right, we'll get into cash on cash in a minute. But cap rate can be more useful in analyzing properties, without the use of leverage to compare them more easily to see what kind of return you get.   Michael: Yeah,   Emil: Because oftentimes with with a loan with financing, you can juice returns. But cap rate again, just allows you to do more apples to apples.   Michael: Perfect. And another way that that I've kind of taught cap rate and what it is inside the resarch Academy is basically it's your cash on cash return for an all cash purchase. So if you see a property that's listed for 100 grand advertised at a 5% cap rate, you would expect a 5% return on your $100,000 purchase, ie a $5,000 NOI, or put $5,000 in your pocket. Now, just like you mentioned, as soon as you put leverage on it, things can change. And so if you and I both bought a five cap property for 100 grand, and you use 80% leverage on 60% leverage, we would have different cash on cash returns. But from a performance standpoint, we would expect the same cap rate.   Emil: Very well said I think I'm just gonna take a backseat On this episode, you are doing a much better job of explaining things. So see you later, Michael.   Michael: It's been a lot of fun. Take care, bye. No, so what when using cap rates? I mean, how do you think about it when determining