Terms For Borrowers

Buyer Proposals — Letters of Intent (the buyer provides it to the seller)

Cap Rate — The net operating income/weighted average cost of capital, debt, or equity

Cash on Cash — Return on an unleveraged transaction calculated as the amount the investor made on the property in relation to the amount invested in the same year.

Debt Service Coverage Ratio — The ratio of cash available to debt servicing for interest, principal and lease payments.

Cash Flow — Current income derived from the asset.

Operating Statement — The income and expenses of a property, also known as the profit and loss statement.

Loan Package — A summary of the key financial, business, and legal information defined in a commercial transaction.

Macro Economy – Interest rates, employment rates, political and economic environment

Capital – Equity and Debt

Loan Constant (APR) – Difference between the interest rate and the amount of interest you are actually paying for the loan payment

Weighted Average Cost of Capital – The average rate businesses pay to finance their assets. You calculate it by averaging all the company’s sources of capital, i.e., the rate of debt and equity weighted by proportion. If it is higher than your cap rate, you will lose money. If less, you will make money.