Terminology

TERMINOLOGY

Simple Interest

  • Interest calculated once per year with the assumption that the interest is withdrawn each year.

Compound Interest

  • Interest calculated more than once per year with the assumption that the interest earned remains in the investment.

Nominal Interest

  • The annual interest rate quoted by a financial institution

Effective interest

  • The actual interest earned per annum taking into consideration the effect of compounding.

Interest Rate

  • The annual % at which interest earned is calculated.

Investment Period

  • The length of time the capital sum is invested

Compound Period

  • The period of time for the calculation of interest, e.g. monthly

Present Value (PV)

  • The initial sum invested or borrowed at the start of the investment period.

Future Value (FV)

  • The sum of money at the end of the investment period.


 

Payment (PMT)

  • The amount of money paid or withdrawn at regular intervals during the investment period.

Number (N)

  • The number of compounding periods during the investment period.

Interest

  • The interest rate per compounding period.

Internal Rate of Return (IRR)

  • The interest each Rand earns per annum whilst invested in a project. Alternatively, that the interest rate which results in a NPV of zero.

Net Present Value (NPV)

  • The difference between capital initially invested and the discounted value of future benefits.

Transaction Price

  • The price at which a transaction has actually taken place. This is a historical fact. Transaction price is used in estimating price at which future transactions will take place.

Most Probable Selling Price

  • A probabilistic estimate of the price at which a future transaction will take place.

Market Value

  • Most probable price a willing purchaser will pay and a willing seller will accept on a specific date.
     

Subjective Value

  • The value of a property to the current owner or potential owner, unique to the individual need not be related to market value.

Investment Value

  • The value of a property to a specific investor.

Potential Gross Income (PGI)

  •  Rental income generated with 100% occupancy.

Effective Gross Income (EGI)

  •  Income remaining after adjusting potential gross income for vacancies and bad debts, includes income from other sources.

Operating Costs (OC)

  • Expenses needed to maintain and operate the building so as to be able to generate income.

Net Operating Income(NOI)

  • The income remaining after deducting operating expenses from effective gross income.

Debt Service

  • The usage of borrowed funds with which to purchase a property.

Before-Tax Income

  • The amount upon which income tax must be paid to the Receiver of Revenue.

Income Tax

  • Subject to the individual ownership.

After-Tax Income

  • Funds remaining after payment of all expenses, debt obligations and tax requirements.   
     

RODE REPORT

  • Quarterly report on most sectors of the property market (now 2010) in major and secondary cities in South Africa.
    It covers levels of rentals, capitalization rates by property grade, township, listed real estate market and building construction costs and building activity.