10 Real Estate Terms You Must Know Before Investing

The real estate market is one such industry that can help you gain profit if you have a thorough understanding of the things happening around you. For that, you must know about the common terminologies that are used by real estate marketers even if you are new to this sector or has years of experience in the field. Here are some of the key terms which you must be familiar with if you are looking forward to investing in the real estate market. In case you are buying prestige marigold plots for investment, here are some terms you must know.

Return on Investment (ROI)

Return on investment is the ratio between net income and investment. A high ROI means the investment’s gains compare favorably to its cost. ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments. It is calculated by dividing the net profit by the total capital cost of investment.

Appreciation

Appreciation in real estate refers to the increase in the value of a real estate property over a period of time. Factors influencing the appreciation rate are location, demand, and physical and social infrastructure. A highly developed locality, as well as a locality that is developing, will provide for a larger appreciation rate in the future.

Cash Flow

Cash flow refers to the movement of money in and out of a business. In real estate, it refers to the money that is generated by the property and the money that is spent in association with the property. When your income is more than your expenses, then your investment is profitable and maintains a profitable cash flow. But if your expenses are greater than your income, then it happens to be a negative cash flow. An investor should choose a property that generates a positive cash flow.

Sale Agreement

A sales agreement is an important legal document that contains all the agreed-upon terms between the buyer and the seller for the sales of a property. A sales agreement must be made by a qualified property advocate. It usually specifies the time for completion and payment details of the property. The document legally binds both the parties, hence proper care and attention have to be taken while drafting the document.

Sale Deed

A sale deed is the main document through which the seller transfers his right on the property to the buyer, who then acquires the ownership of the property. This is a compulsory document, which confirms the ownership of the property in exchange for the price.

Carpet Area

The carpet area is the total usable floor area of an apartment, excluding the area covered by the external walls but including the area covered by the internal partition walls of the apartment. It is also defined as the area enclosed within walls and the actual area to lay the carpet.

Built up Area

The built-up area in a flat is its carpet area plus the space taken by the wall. It also includes other unusable areas like balconies, terraces, etc.

Floor Area Ratio (FAR)

The floor area ratio is the ratio of a building’s total floor area to the size of the piece of land upon which it’s built. It is a ratio between a building’s gross floor area and the land area.

Stamp Duty

Stamp duty is a tax imposed on the sale of property or ownership by the state government. The duration of the stamp duty at the time of registration shall be based on the value of the property.

Down Payment

A down payment is a sum of money that a buyer pays in the early stages of purchasing a property. It is usually a certain percentage of the total sale price paid to buy the buyer to finalize the sale. It acts as a guarantee.

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