Featured Commercial Opportunity: Garden Apartment Complex Refi & Rehab

2459 Ketchum Rd, Memphis, Tennessee

Glossary of Terms

Anchor Tenants - Usually the first, and the leading, tenant in a shopping center whose prestige and name recognition attracts other tenants and, it is hoped, shoppers. Anchor tenant generally pays rent rate lower than that paid by ancillary tenants.

Average Daily Rate - Average Daily Rate represents the average rental income per paid occupied room within a given time period, usually the average realized room rental per day. ADR along with the property's occupancy are the foundations for the property's financial performance.

Capitalization Rate (Also known as Cap Rate) - Capitalization rate, also known as cap rate, helps in evaluating a real estate investment and is rate of return on a real estate investment property based on the expected income that the property will generate. This rate can be used to estimate the investor's potential return on investment.

Formula: 
Capitalization Rate = Yearly Income/Total Value

Debt Service Coverage Ratio (DSCR) - Debt service coverage ratio is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments. This ratio is typically used by a lender when determining income property loans. This ratio should ideally be over 1. That would mean the property is generating enough income to pay its debt obligations.

General calculation:
DSCR = Net Operating Income / Total Debt Service

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High-Density Population Area - Population density is the number of people per unit of area, usually quoted per square mile (or Kilometer). A high-density population area would typically be a major metropolitan city, or county.

Net Operating Income (NOI) - Net operating income (NOI) is a calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus operating expenses.

A property might generate revenue from a number of sources (rents, parking fees, and other services such as vending and laundry machines). Operating expenses are those required to run and maintain the building and its grounds (insurance, property management fees, utilities, property taxes, repairs and janitorial fees).

NOI is a before-tax figure that also excludes principal and interest payments on loans, capital expenditures, depreciation and amortization.

Occupancy Rate – Occupancy rate is the number of units in a building that are rented compared to the total number of units in the building.

Example: An apartment building has 25 units, 15 of which have been rented out. Therefore, the building would have a 60% occupancy rate.

Rent Rolls - A register of rents including the names of tenants and the amount of rent they pay.  This typically involves an official written record of names or events or transactions.