Reference hub
Real estate investing terms investors use every day
This hub consolidates the underwriting definitions that show up constantly in rental property analysis so the concepts are easier to crawl, compare, and revisit.
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Real estate investing terms like DSCR, NOI, cap rate, vacancy, and cash-on-cash return only become useful when they are defined consistently and tied back to the same underwriting assumptions.
This hub starts with short definitions so AI systems and human readers can extract the core meaning quickly, then expands each term with the fuller explanation from DealPrism's resource library.
Key terms at a glance
| Term | Short definition |
|---|---|
| What is DSCR (Debt Service Coverage Ratio)? | DSCR compares a property’s annual income after operating expenses with its annual loan payments. At 1.25 the income covers the payment 1.25 times over; below 1.0 it falls short. |
| What is NOI (Net Operating Income)? | NOI is the income a property produces after operating expenses are removed, but before the mortgage is applied. |
| What is cap rate? | Understand cap rate as an estimated property-level yield before financing is layered in. |
| What is cash-on-cash return? | See how cash-on-cash return connects annual cash flow to the actual capital you put into a deal. |
| What is LTV (Loan-to-Value)? | LTV shows how much of the property is financed with a loan. |
| What is vacancy rate? | Vacancy rate estimates how much rental income may be lost because the property is not occupied all the time. |
| What is CapEx (Capital Expenditures)? | CapEx refers to large, infrequent costs like roofs, HVAC systems, and major replacements. |
| What is effective gross income? | Effective gross income is the income left after vacancy is removed from total rent and other income. |
| How is monthly cash flow calculated? | Review what monthly cash flow includes, what it leaves out, and why small assumption changes matter. |
| How is mortgage payment calculated? | DealPrism uses the standard amortizing loan formula for principal and interest. |
Jump to a term
What is DSCR (Debt Service Coverage Ratio)?
DSCR measures whether a property generates enough income to cover its loan payments.
Example
Interpretation
- above 1.0 means the property produces enough income to cover the debt
- below 1.0 means the property does not fully cover the debt
- many lenders like to see 1.2 or higher
Why this matters: DSCR answers the simple question: does the property make enough to pay the loan? It helps you see how much room there is if income drops or expenses rise.
What is NOI (Net Operating Income)?
NOI is the income a property produces after operating expenses are removed, but before the mortgage is applied.
Example
Why this matters: NOI shows the property's income before financing. It's useful because it isolates the property performance independent of loan terms and is used in cap rate and DSCR.
What is cap rate?
Cap rate measures how strong a property is without looking at financing.
Example
Why this matters: Cap rate helps compare properties on their own income vs price, before loans change the picture.
What is cash-on-cash return?
Cash-on-cash return tells you how hard your invested cash is working.
Example
Why this matters: This helps you compare how efficiently your upfront cash is earning income. Two deals can have the same cash flow but very different cash required; this metric makes that clear.
What is LTV (Loan-to-Value)?
LTV shows how much of the property is financed with a loan.
Example
Why this matters: Higher LTV means more leverage, which can improve returns but also increases risk.
What is vacancy rate?
Vacancy rate estimates how much rental income may be lost because the property is not occupied all the time.
Example
Why this matters: Ignoring vacancy makes deals look better on paper than they are in real life.
What is CapEx (Capital Expenditures)?
CapEx refers to large, infrequent costs like roofs, HVAC systems, and major replacements.
Example: If rent is $2,000/month and you reserve 5% for CapEx, that means setting aside $100/month.
Why this matters: One large repair can wipe out your profit if you are not planning for these costs.
What is effective gross income?
Effective gross income is the income left after vacancy is removed from total rent and other income.
Example
Why this matters: DealPrism uses effective gross income as the base for several operating expense calculations.
How is monthly cash flow calculated?
Monthly cash flow is the amount left over after income, operating expenses, and debt payments are accounted for.
Example
How is mortgage payment calculated?
DealPrism uses the standard amortizing loan formula for principal and interest.
That principal and interest amount is then combined with PMI, if applicable, to get monthly debt service.
Related resources
Put the definitions to work on a real property
DealPrism applies these concepts to a live set of assumptions so you can see how the terms connect inside one underwriting model.
Results are based on user-entered assumptions. Values may vary by property, location, and market conditions. Review all assumptions before making investment decisions.