Module 2: Real Estate Investment Basics

Real Estate Terminology: Key Terms Every Investor Should Know

Learn essential real estate investment terms like NOI, Cap Rate, IRR, and more. A clear glossary to help beginners and experienced investors speak the industry language.

RealVantage

16 Sep 2025 • 3 min read

Introduction

Every industry has its own language, and real estate is no exception. Whether you’re exploring your first property investment or managing a diversified portfolio, knowing the key terms will help you make informed decisions, evaluate deals more confidently, and communicate effectively with brokers, asset managers, and co-investors.

Below is a glossary of essential real estate investment terms, explained in plain language, with examples to make each concept clear.

1. Net Operating Income (NOI)

Definition: The annual income generated by a property after deducting operating expenses (maintenance, property management, taxes, insurance) but before financing costs and taxes.

Formula: NOI = Gross Rental Income – Operating Expenses

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Example: If a property earns S$1,000,000 in rental income and has S$300,000 in expenses, its NOI is S$700,000.

2. Capitalisation Rate (Cap Rate)

Definition: A percentage that shows the annual return on a property based on its current market value or purchase price.

Formula: Cap Rate = NOI ÷ Property Value

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Example: A property with S$700,000 NOI and a market value of S$10,000,000 has a cap rate of 7%.

3. Internal Rate of Return (IRR)

Definition: The annualised return rate that makes the net present value (NPV) of all cash flows from an investment equal to zero. It considers both income and capital gains over time.

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Example: IRR is useful for comparing deals with different cash flow patterns over multiple years.

4. Cash-on-Cash Return

Definition: Measures the return on the actual cash invested in a property, ignoring debt principal repayment and appreciation.

Formula: Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Total Cash Invested

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Example: If you invest S$500,000 and earn S$50,000 annually, your cash-on-cash return is 10%.

5. Equity Multiple

Definition: Shows how much total cash you receive compared to the amount you invested, over the life of the investment.

Formula: Equity Multiple = Total Cash Distributions ÷ Total Equity Invested

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Example: An equity multiple of 2.0x means you received double your original investment over the project’s duration.

6. Loan-to-Value Ratio (LTV)

Definition: The ratio of the property’s loan amount to its appraised value, used by lenders to assess risk.

Formula: LTV = Loan Amount ÷ Appraised Property Value

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Example: A S$6,000,000 loan on a S$10,000,000 property has an LTV of 60%.

7. Gross Leasable Area (GLA)

Definition: The total floor area available to be rented to tenants, excluding common areas like lobbies and hallways.

8. Occupancy Rate

Definition: The percentage of available rental space that is currently leased.

Formula: Occupancy Rate = (Leased Space ÷ Total Available Space) × 100%

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Example: A 100,000 sq ft building with 90,000 sq ft leased has a 90% occupancy rate.

9. Build-to-Suit

Definition: A property constructed specifically for a tenant’s needs, often with a long-term lease in place before development begins.

10. Triple Net Lease (NNN)

Definition: A lease agreement where the tenant pays property taxes, insurance, and maintenance costs in addition to rent.

Why This Matters for Investors

Knowing these terms isn’t just about jargon, it’s about understanding deal structures, assessing risk, and comparing opportunities. For example:

Cap Rate helps you compare property income potential.
IRR shows the overall return considering time value of money.
LTV influences financing decisions and risk exposure.

How RealVantage Helps You Navigate the Numbers

RealVantage simplifies complex deal metrics by:

Providing clear investment summaries for every opportunity.
Including projected NOI, IRR, and equity multiples in deal briefs.
Offering educational resources to help investors interpret performance data.

Next in the Series

📖 Read next: Property Cycles & Market Dynamics — Understand how property markets move through different phases and what that means for your investments.

Learn more

Disclaimer

This article is for informational purposes only and does not constitute investment advice. All investments carry risks, including the potential loss of capital. Past performance is not indicative of future results. Investors should conduct their own due diligence and seek professional advice before making investment decisions.