Real Estate Investment Terms, Explained
Plain-English definitions for the metrics and terms used across Reaixo's property reports — cap rate, ARV, BRRRR, and more.
Cap Rate (Capitalization Rate)
The capitalization rate measures a rental property's income potential relative to its purchase price or market value. It's calculated by dividing a property's net operating income (NOI) by its value: Cap Rate = NOI ÷ Property Value. A higher cap rate generally indicates a higher potential return but often reflects higher risk. In high-cost urban markets, 4–6% is typical; in secondary and tertiary markets, 7–10% or higher is achievable.
See it in action: Rental Property Analysis →Cash-on-Cash Return
Cash-on-cash return measures the annual pre-tax cash income earned on the actual cash invested in a property — typically the down payment, closing costs, and any upfront renovation spend — rather than the total property value. Expressed as a percentage, it is one of the most common metrics for evaluating rental property investment performance.
See it in action: Rental Property Analysis →Net Operating Income (NOI)
Net operating income is a property's total income from rent and other sources, minus operating expenses such as property taxes, insurance, maintenance, and property management — but before accounting for debt service (mortgage payments). NOI is the input used to calculate cap rate and is a core metric for evaluating a rental property's profitability independent of how it's financed.
See it in action: Rental Property Analysis →ARV (After-Repair Value)
After-repair value (ARV) is the estimated market value of a property after all planned renovations or repairs have been completed. It is the key number in fix-and-flip and BRRRR analysis — investors compare ARV against total project cost (purchase price plus renovation and holding costs) to determine potential profit. ARV is typically estimated using comparable sales of similarly renovated properties in the same area.
See it in action: Fix and Flip Analysis →BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
BRRRR is an investment strategy where an investor purchases a distressed property, renovates it, rents it out to tenants, refinances the property based on its improved post-renovation value, and uses the cash-out equity to fund the next acquisition — repeating the cycle to build a rental portfolio with limited new capital each round.
See it in action: Rental Property Analysis →Fix and Flip
A fix and flip is a real estate investment strategy where an investor purchases a property below market value — usually one needing repairs or updates — renovates it, and resells it for a profit, typically within months rather than years. Profitability depends on accurately estimating the after-repair value (ARV), renovation costs, and holding costs such as financing, taxes, and insurance during the project.
See it in action: Fix and Flip Analysis →Comparable Sales (Comps)
Comparable sales, or "comps," are recently sold properties similar in location, size, condition, and features to a subject property. Comps are the primary data source used to estimate a property's current market value or, for renovation projects, its after-repair value (ARV) — comparing it against similar homes that have already sold nearby.
See it in action: AI Home Value Report →Price Per Square Foot
Price per square foot is a property's price divided by its total livable square footage. It's a quick way to compare properties of different sizes within the same market, though it should be weighed alongside condition, lot size, and location rather than used alone to judge value.
See it in action: AI Home Value Report →Ready to Put These Numbers to Work?
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