There is something new to learn every day. Everything you learn today will go a long way in your life. The same is the case with the real estate industry. The real estate industry is a vast topic that one can’t cover in one day. Starting from policies till taxes, from buying till selling there is a lot that is left in between to discuss.
You can’t cover everything in just one day. But what you can do is start with the basics. The basic thing is the real estate terms that can help you in the investment. There are some real estate terms that make you examine the deals better. Till the end of this article, you will feel like a pro beginner in the real estate industry.
Terms That You Shouldn’t Miss Out On
Starting with the real estate terms below are some basic terms that will aid you in understanding your needs better. After that, you can state your demands and requirements in a more professional way to the real estate agent. So look ahead and see if there is anything that describes your requirements aptly.
1. Return On Investment
Return on investment is as clear as its name. Return on investment is a profit when you make any sort of investment in the real estate industry. There is a proper formula to calculate the return on investment for you.
ROI= Net Income / Cost Of Investment
As the formula highlights, the higher the investment is, the higher the return on investment. By calculating the return on the investment beforehand you can actually make the decision. You can see if the investment is profitable or not.
2. Market Value
Properties are listed on the sales list. The market value is similar. In simpler words, market value is the base rate per square foot. Later than the market valuation, properties are listed for sale by the seller. All the other charges and taxes are excluded like GST, amenity charges, preferential location charges, maintenance fees etc. All these additional charges and taxes conclude to make 20% of the basic sale price.
3. Cash Flow
Cash flow is the net amount of cash you earn monthly from a property after minimising all operating charges. If we try to put in a formula, cash flow is the net difference between money coming and going out of your asset.
Cash Flow = Coming Money – Going money.
There are negative and positive cash flows. Positive cash flow is where your incoming money is more than your expenses. Completely opposite to that, negative cash flow is where your expenses are higher than your income. In an ideal situation, an investor should opt for a rental property that can maintain a positive cash flow.
Who doesn’t like appreciation? Be it personal or professional, with appreciation. We have a renewed zeal to work. But appreciation can feel a lot better when it is translated into money profit. Appreciation means a rise in the property’s price over a period of time. There are several factors that contribute to the appreciation. The factors are as such, location, high property demand, limited supply and inflation. For instance, the property among the best infrastructure or the developing surrounding will get appreciated in no matter of time. Apart from the infrastructure advancement, properties with a nicer view like a lake or sea will also be on a higher appreciation side. The more desirability, the more appreciation.
5. Freehold Properties
Freehold properties are the best option to invest in. Freehold properties are where the sole owner has complete and unrestricted ownership of land and property. These types of properties can be transferred and inherited by anyone the owner chooses without any complications. There is no state authority required in the process. If compared with leasehold properties, freehold properties are more beneficial. The freehold properties are bound to attract more value in the future. This type of property is bought through an auction or lottery. The buyer gets both the land and the home built on it.
6. Escrow Entail
The escrow entail is the last stage in the deal. The escrow entail is the third party in the deal, in between the seller and buyer. This third party is the neutral part of the deal. The main function of this escrow entail is the money transaction and paper handover at the last stage.
7. Earnest Money
Earnest money is like a deposit amount while purchasing a house. The earnest money is often requested by a real estate agent you are consulting. The earnest money is 1 or 2% of the total amount of the property. The earnest money works like a flagged payment. When you pay earnest money, it helps in taking off the property from the market. After the earnest money payment, the latter procedure also starts.
So tell us, how many real estate terms were appealing to you? How many terms have you heard about for the first time? As we said in the introduction, there is no limit to one’s learning. So today was another learning day of your life. You can use these terms while negotiating with your real estate agent or the dealer. These terms will make your deal easier and more beneficial. On top of everything else, with the help of these terms, you can get a better understanding of what you want and what you need. Don’t forget to explore further. As the saying goes, half knowledge is more dangerous than no knowledge. Make sure to be prepared before you get down to a decision. We can also show you the best apartments for sale in Jumeirah Village Triangle or some best luxury properties in Dubai.