Abbreviations in the property world…
Updated: Feb 22, 2019
So you may of read a few of our posts now and noticed there is some terminology floating around that makes no sense, or you’ve just quickly skimmed over the word because you’re thinking ‘I have no idea what that means… We’ve all done it! We want to make sure that everyone who reads our website, social media posts and blogs, understands them. So here we offer a brief explanation of abbreviations and terminology so you can get up to speed with the information that we are putting across.
ROI - Return on investment; so this is well used within the property and investing world. It is the ratio between the net profit and the cost of investment. It is worked out by calculating the annual net profit from the house (so the profit from the rent after all bills, fees etc are deducted) then this is divided by the money left in the property (after refinancing). The figure is then multiplied by 100 to calculate the percentage amount.
Why is this important? We have a target ROI % that we aim for when calculating deals, to ensure all investments are worth while and gaining the highest return. This is so you get the best deal as an investor and we produce a percentage for ourselves. So if you hear us saying ‘The ROI is good’ you know you’re in for a winner.
Yield - is this a type of gold? A chant from vikings? Nope, its a term that estate agents often use to show the annual return you are likely to get on your investment. Similar to ROI, it is calculated by multiplying the gross monthly rent (The rental income before bills and mortgage are deducted) by 12. This is then divided by the value of the property and the figure multiplied by 100, to give the percentage amount.
Why is this important? Again the percentage will determine whether to go ahead with the property or not, as we have a target % to meet.
We run our figures on every property before even putting in an offer, to ensure that both the ROI and Yield works for an investment purpose.
If you would like to know any more information feel free to contact us!
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