Take time to understand real estate investing lingo before jumping in.
Several blog posts ago, we talked about several essential real estate investing terms to know. Investing in commercial real estate is a profitable means of receiving passive income, especially with apartment buildings. Last time, we covered NOI, cap rate, cash flow, closing costs, gross rental yield, and HOA fees. Now we will summarize six more terms.
Appreciation
Appreciation is the increase in your property’s value over time. Its opposite, naturally, is depreciation. Appreciation occurs due to many different influences, such as neighboring development, inflation, a decrease in demand, and so on. Depending on these various factors, your commercial real estate will look more or less appealing to potential tenants and investors.
Equity
Equity is a complex subject. In its simplest explanation, it is the difference between the current value of the property and the mortgage the current owner decided to take on for it. If its present value is $400,000, but the owner is paying a $350,000 mortgage for it, the equity is $50,000. If an investor decides to sell his commercial property, he will receive the equity after paying off the mortgage.
Debt-to-Equity Ratio
The debt-to-equity ratio is the measurement of what you’ve paid and how much you owe on the mortgage. This percentage helps show how much ownership you truly have on the property and gives you an idea of how much you can take away if you decide to sell. How well you handle your debt and capital will prove to lenders how creditworthy you are.
Escrow
Escrow is a third party that holds payments in between transactions between buyers and sellers. It helps to guarantee that both parties are satisfied with the deal before allowing the sale to take place.
Inspection Contingency
In a contract, a home buyer can take advantage of the inspection contingency within it. This contingency allows the buyer to have an inspector evaluate the home and report the findings. With this report, the buyer can decide to negotiate or terminate the purchase agreement. If the buyer does not follow through on the opportunity, he must agree to the previously-arranged deal.
Turnkey Property
A turnkey property is a very appealing type of commercial real estate. If an apartment building is move-in ready with no need of renovations or further inspections, it is a turnkey property. Investors can reap an income right away. However, do not forget to carefully research the condition of various so-called turnkey properties before jumping in on an opportunity.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for the perfect realtor for your property or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with selling your home and getting the best possible price, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.