Intermediate2 hours15 terms

Activity Ratios: Key Investment Terms

Explore this curated collection of key activity ratio terms commonly used in real estate investment analysis. These carefully selected concepts might be helpful for understanding property performance and operational efficiency. Use this reference to clarify terminology you may encounter when evaluating potential deals.

Term Collection

Leasing Velocity

Leasing velocity measures the rate at which vacant real estate units or square footage are successfully leased or re-leased over a specific period, reflecting market demand and operational efficiency.

Intermediate5 min

Days on Market

Days on Market (DOM) measures the number of days a property listing remains active on the Multiple Listing Service (MLS) before going under contract. It indicates how quickly properties are selling in a specific area.

Beginner2-3 min

Operating Expenses

Operating expenses are the ongoing costs of running and maintaining a real estate investment property, excluding mortgage principal and interest payments, and capital expenditures.

Beginner13-14 min

Vacancy Rate

The vacancy rate is the percentage of all available rental units in a property or market that are currently unoccupied or not generating income, serving as a key indicator of a property's financial health and market demand.

Beginner13-14 min

Activity Ratio

Activity ratios are financial metrics that measure how efficiently a company or investment property uses its assets to generate revenue. In real estate, they help investors assess operational efficiency and how quickly assets are converted into sales or cash.

Beginner5 min

Effective Gross Income

Effective Gross Income (EGI) is a realistic measure of a property's total potential revenue, calculated by subtracting estimated vacancy and credit losses from its Potential Gross Income (PGI). It provides a more accurate picture of a property's income-generating capability for financial analysis.

Intermediate12-13 min

Net Operating Income

Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.

Intermediate11-12 min

Financial Statement Analysis

Financial Statement Analysis (FSA) is the process of evaluating a business's financial health and performance by examining its financial statements, crucial for real estate investors to assess property viability, investor solvency, and project risk.

Intermediate8-9 min

Occupancy Rate

The occupancy rate is a key real estate metric representing the percentage of a property's available units or space that is currently leased or occupied by tenants, indicating demand and income stability.

Intermediate14-15 min

Asset Turnover Ratio

The Asset Turnover Ratio measures how efficiently a company or investment property uses its assets to generate sales revenue. It indicates how many dollars in sales are generated for each dollar of assets.

Intermediate5 min

Absorption Rate

The absorption rate measures the pace at which available properties are sold or leased in a specific market over a given period, indicating the balance between supply and demand.

Intermediate13-14 min

Performance Measurement

Performance measurement in real estate investing involves tracking and analyzing key financial metrics to evaluate how well an investment is performing against its goals and market benchmarks. It helps investors make informed decisions and optimize their strategies.

Beginner6 min