Is this your first time investing in real estate? Check out this list of real estate terms to have a better idea of what they mean. We'd be pleased to assist you in any way we can. In either case, you need to be familiar with common acronyms and jargon to make your first real estate investment or diversify your investment portfolio in the future. It's important to grasp the meaning of terms like ROI and EMI so that when you hear them in the future, you know what they imply and why they're important.
It's not realistic to study all the terminology at once as a novice. Still, you can familiarise yourself with some of the more popular ones right now. Every real estate marketer or investor should be familiar with these 10 frequent real estate words.
1. Return on Capital Employed (ROI)
Investment returns are measured in terms of ROI, or Return on Investment (ROI). Net profit is divided by the investment's total capital cost to get the return on investment (ROI). It's preferable to have a high ROI than a low one. Calculating the return on investment (ROI) can help you determine if an investment is worthwhile or not.
Return on Investment (ROI) is calculated as Net Income / Investment Cost.
2. The BSP or Market Value (BVM) (MV)
Sellers offer their properties for sale at a price per square foot known as the "Basic Selling Price" (BSP) or "Market Value" (MV). Other fees, such as GST, amenity fees, favoured location fees, or other maintenance costs, are included. As much as 20% of the BSP can be charged for these additional fees.
After deducting all running expenditures, cash flow is the net amount of money you receive from a property each month. It is the difference between the amount of money that comes in and the amount that goes out. For an investment to be lucrative, it must generate more revenue than it consumes. Negative cash flow occurs when your spending exceeds your income. Renting a property that generates a positive cash flow is ideal for an investor.
In real estate, the term "appreciation" refers to a rise in the value of a particular property over time. A property's value might rise due to factors such as a desirable location, high demand for homes, a limited supply, and inflation. For example, new and planned commercial and infrastructure improvements are expected to lead to a rise in property values in some areas. Aside from that, properties with a unique 'view,' such as a lake or the ocean, will be in more demand among purchasers and hence see a greater rate of appreciation than others.
5. Turnkey Property
A nearly-completed or nearly-move-in ready home or apartment is referred to as a "turnkey" property. Investors prefer turnkey properties since they don't have to wait long to begin renting them out. Owners of newly constructed residences needn't worry about extensive renovations or repairs. Another advantage of turnkey houses is that purchasers can inspect the property in person before making a final decision.
6. Built Up Area
An apartment's or house's built-up floor area includes everything from its carpet to its walls to its balconies. Inner walls and balconies will take up to 30 per cent of the space in an apartment in India. For example, if a house has 1000 square feet, the carpet area will not exceed 700 square feet. That's why it's important to include the built-up area in the total square footage.
7. Carpet Area
For the purposes of RERA's Carpet area, the net useable floor area of an apartment excludes the area covered by the external walls, regions beneath service shafts and exclusive balconies or verandas. Still, it includes the interior partition walls of the flat. For the sake of this definition, we can say that carpet area refers to the whole floor area of an apartment, minus the thickness of the interior walls.
8. Super Built-Up Area
Since real estate agents use this area for marketing their projects to potential buyers, it's also known as the saleable area. Carpet, wall thickness, and other places within the apartment such as the terrace, stairways, elevators, and corridors are all included in the super built-up area. The extra built-up area may also include a gymnasium or swimming pool, a clubhouse, or a garden.
Built-up areas plus common areas are known as "super built-up area."
9. Floor Area Ratio (FAR) or Floor Space Ratio (FSR)
It is known as the Floor Area Ratio (FAR) or the Floor Space Ratio (FSR) since it relates to the maximum amount of land used for building. A building's gross floor area divided by its land area is referred to as its footprint. FSI (Floor Space Index) is stated as a percentage, but it has the same meaning. It is up to the individual governments to set the FAR guidelines in their separate jurisdictions. The FAR value is used to determine features such as the building's height and the number of floors. The built-up area of a property with a higher FSI will be greater.
10. Freehold Property
If you own a freehold property, you own the land as well as the building outright. There are no restrictions on the transfer of the property in this situation, and it can also be passed down through the generations. In the long run, freehold properties will be more valuable than leased properties. An auction or lottery is the most common method of purchasing freehold land. Buying a freehold home gives you the right to own both the house and the land it was constructed on. A freehold property's sale is easier because the state does not need to approve it.
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