Evaluating a real estate investment involves several key metrics:
Cap Rate: The ratio of net operating income to property asset value, indicating the rate of return. Cash on Cash Return: The ratio of annual pre-tax cash flow to the total cash invested, showing the cash yield on investment. Net Present Value (NPV): The difference between the present value of cash inflows and outflows, helping to assess profitability. Internal Rate of Return (IRR): The rate at which the net present value of cash flows from the investment equals zero, indicating overall profitability.