Understanding Real Estate Terminology
Are you new to the world of real estate? Would you like to be introduced to the most frequently used terms by real estate promoters? We are glad to assist with this. So whether you wish to start out in real estate or want to widen your investment portfolio, there are many common acronyms and jargons that you need to know beforehand. This way whenever you come across these terms which are formed like ROI, EMI or FSI for example, you will know what it means and its importance .
As a beginner, it is not very practical to learn all the vocabulary at once, but you can learn a couple of the most common ones here. Here are the 13 most common real estate phrases every marketer or investor within the real estate business should know.
## 1. Return on Investment (ROI)
Return on Investment (ROI) indicates the profit obtained from a real investment. ROI is arrived at after dividing net profit by total said capital cost of investment. The higher the ROI the higher the profit that is earned. Thus, ROI is figuring out whether an investment will be beneficial in future.
ROI = Net Income / Cost of Investment
2. Basic Sale Price (BSP) or Market Value (MV)
The Basic selling price (BSP) or Market value (MV) is in quote for every sq ft area the seller estimates the property at for selling. And it is not augmented by Other charges such as Goods and Services Tax, amenity charges, preferential location charges, and any other fees for maintenance. These additional charges can come up to 20% of the BSP.
3. Cash Flow
Cash flow stands for the amount of cash you receive every month from a property after operating costs have been deducted. It is the net inflow and outflow of cash in the property. When the income from the asset is greater than its running costs, the asset generates a positive cash flow and so is a good investment. However, if any. The income generated is lesser than expenses, it is termed as negative cash flow. Ideally, an investor should purchase rental property which would have a great positive cash flow.
4. HOA
Throughout the United States, homes within the same developments/communities are regulated by the HOA, also known as the Homeowners’ Association. Almost all of the subdivisions or planned housing developments have and are required to have a HOA. The HOA would gather and demand some payment from the resident owners for the care of the property. When purchasing property within the boundaries of the HOA, plenty of owners are engulfed into the association and subsequently meet their obligations to pay HOA for the maintenance of the purchased property.
5. Appreciation
The meaning of appreciation as used in real estate is the value of the property after being possessed for some time. The demand and supply of the property, development or improvement of value retail centers in definite regions and even inflation itself can stimulate the growth in value. For instance, as prices increase, all the houses built in developing regions and growth plans-applicable areas are expected to yield high returns. Properties that have a view, like sea views, mountain views, or lake views, etc. will expect a stronger peak appreciation over properties that do not have those characteristics.
6. Turnkey Property
Turnkey property refers to the kind of property that is almost complete or needs minimal work before one can move in. For investors, there is hardly any need to wait for a long time to rent out the property as purchasing and renting out is very easy and quick; hence the demand for such properties is high. Since these properties are newly developed, their owners would not have to do any significant construction or repair works. What is more, buyers are very much pleased with the quality of the home as they can directly visit and evaluate its state before spending their money.
7. Equal Monthly Installment (EMI)
Equal Monthly Installment , shortly referred to as EMI is basically the amount of money that a lender is required to pay on a monthly basis to the borrower of a loan. From the varoius audience buyers that seek out a home loan in order to purchase of an asset, EMI is mostly common Step-by-step calculating mechanics were put in place to ensure the calculation of the EMI is consistent on the objective values such as the amount of loan, the payment period or term, the amount of money that is paid monthly, the age bracket of the individual and the clients credit card repayment history. Homebuyers that wish to purchase properties can avail themselves of home loans from various banking and financial companies. To find out how much you would pay monthly, visit an online home loan EMI calculation website for your principal amount, tenure and interest rate.
8. Built-up Area
The additional area that a home buyer can claim such as the balcony spaces, thickness of walls and the carpet area which also comprises of the internal areas such as the bathrooms are termed as the built area. It is stated that in India it is a general practice to use around 30% of the constructed area of a building for this purpose And for more broad context if a regular apartment is known to have any building space of about 1000 square feet then architectural documents will clearly state that the space covered by carpet will not exceed 700 square feet. Hence, built-up area can also be quantified as spare space available for occupation to a new home owner.
9. Carpet Area
The Real Estate Regulations Authority has made a proclamation that the area available for servicing which stays inside the walls of an apartment and is enclosed but does not cover the external huge walls used for support is classified as the carpet area. To provide further elaboration on this subject, the carpet area can simply be termed as the inside net area of a covered apartment minus some walls or a little to no inclusion of any internal structures inside the apartment out of which the neat and dry area stays untouched.
10. Super Built-Up Area
When realtors want to sell their projects to buyers they use an area referred to as super-built up area or saleable area. The super-built up area includes over and above the carpet area and thick walls, things that were usually not included like terraces, corridors, lobby, staircases and lifts. Sometimes even amenities like gymnasiums, swimming pools, clubhouses and gardens are mentioned in the area.
Super built-up area = Built-up area + common areas
11. Floor Area Ratio (FAR) or Floor Space Ratio (FSR)
Also known as FAR, Floor Area Ratio and FSI both deal with the amount of available space after purchasing a piece of land, providing a value of ratio denoting the amount of floor space that can be allocated to the building. Several other terms can also be used interchangeably with it even though these terms do give it more definition – applicable for the floor space index (FSI). According to the surrounds one may be in, how much space you can build up is space governed. Each municipality determines the FSI for a specific area i.e unit blocks. The higher the value of the FSI the higher the area consumed by the building after its construction.
12. Freehold Property
Freehold property can be defined as the type of property in which the user in complete possession of the land and building, as well as has the right to use it freely. In this case, the restrictions for further transfers by the owner do not apply, and it is possible to pass down such a property as well. Freehold properties are more often than not far more secure than their leasehold counterparts, and stand to increase in value in the future on account of their being freehold. Freehold land is normally acquired by winning bids or lotteries. For instance, when a buyer purchases a free-hold building, he will also be acquiring the land surrounding that house. In this case, however, the sale of a freehold property is relatively hassle free in that such a property is not subject to state-imposed licensing.
13. Credit Score
As we can observe, a credit score serves a more general purpose than simply measuring one’s creditworthiness; it is a tool used in deciding a person’s capability to repay debts that have been granted to them. To put it another way, a score is just that, a score derived from one’s credit report and ranges from 300 to 900. In terms of CIBIL scores, having a score above 750 is generally expected to be regarded as good too. The credit score is also important for banks and other lenders as they use it to gauge whether or not they will issue a home loan to an individual. The score is calculated on the basis of the individual’s credit report, which is the history of all loans that have been provided to them. The better the individual pays off his loans and the higher the score, the better are the chances that the borrower will get a loan. A good credit rating can also provide access to a variety of advantageous options such as reduced rates, flexible conditions, and even expedited processes.
Conclusion: Making Informed Investment Decisions
Establishments and purchasing of land can be a somewhat challenging task, perhaps for the reason that it also happens to be one of the most profitable types of buying investments one could make in India. A piece of land simply doesn’t depreciate; if anything, it only gets better in value with time. In this case, if one is aware of the terms of the land and the market too, they can make a sound investment that guarantees growth in profit. We hope this article was helpful for you.
There are a plethora of different types of property related queries; however, if you have any of them, feel free to contact our advisers and we will be glad to help you.
Author – Dream Location
As the Dream Location, the most reliable real estate brand in the country, our goal is to provide potential home buyers with a conformable, convenient, and clear medium and assistance in regards to home purchase related issues. We offer news stories and articles with interesting material in various aspects of the real estate industry.
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