Capital gain: Taxable income derived from the sale of a capital asset. It is equal to the sale price less the cost of sale, adjusted basis, suspended losses, excess cost recovery and recapture of straight line cost recovery.
Capitalization: The process of converting the future net operating income of an income- property a single present given a capitalization producing into value, rate.
Capitalization Rate: A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by price.
Cash flow after taxes (CFAT): The periodic amounts of money received by an investor after taxes from the operations of a real estate investment.
Cash flow before taxes (CFBT): The periodic amounts of money received by an investor before taxes from the operations of a real estate investment.
Cash flow model: The framework used to determine the cash flow from operations and the cash proceeds from sale.
Cash flows: Investment returns generated by one of two methods: current income (rents, dividends, etc.) minus expenses and debt service or cash proceeds received upon the sale of an investment (reversion).
Cash-on-cash rate: A simple return measure. Calculated as cash flow before taxes divided by initial equity investment.
Cash proceeds from sale: The sale price less sale costs, mortgage balance, and tax liability on sale. Also called the "sale proceeds after taxes."
Class life: The useful economic life of an asset set by the IRS.
Compound interest: Interest computed on the original principal and accumulated interest.
Compounding: A type of calculation in which interest earned is reinvested and earns additional interest.
Cost: The actual dollar amount paid for a property or the amount needed to build or improve it at a specified time in the future.
Cost approach: A way to determine the market value of a property by evaluating the costs of creating a property exactly like the subject.
Cost recovery: An annual deduction based on the class life of an asset
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