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In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [1] It is used to evaluate new projects of a company.
For income-producing real estate, the NOI is the net income of the real estate (but not the business interest) plus any interest expense and non-cash items (e.g. -- depreciation) minus a reserve for replacement. The CAP rate may be determined in one of several ways, including market extraction, band-of-investments, or a built-up method.
Capitalization rate (or "cap rate") is a real estate valuation measure used to compare different real estate investments. Although there are many variations, the cap rate is generally calculated as the ratio between the annual rental income produced by a real estate asset to its current market value. Most variations depend on the definition of ...
Cost approach is a real estate appraisal valuation method used to price an individual property. [1] It is one of three methods, the others being market approach, or sales comparison approach , and income approach .
The amount a buyer is likely to pay for a real estate asset (i.e., property). Broadly speaking, capital gains tax is the tax owed on the profit (aka, the capital gain) you make when you sell an ...
Where i is the interest rate, r p is the property tax rate, m is the cost of maintenance, and d is depreciation. The rent is the sum of these rates multiplied by the price of the house, [2] P H. More detailed user cost models consider differential interest costs for housing debt and owner equity and the tax treatment of housing capital income. [3]
The capital charge is the cash flow required to compensate investors for the riskiness of the business given the amount of economic capital invested. The cost of capital is the minimum rate of return on capital required to compensate investors (debt and equity) for bearing risk, their opportunity cost.
A market leasing assumption (MLA), sometimes known as a speculative rent profile (spec rent) or market rent, is an accounting method used in commercial real estate to produce budget predictions and valuations. It is a sort of template, or standardized lease, that is applied to rental units for periods in the future when there is no contracted ...