Dictionary

You can browse real estate terms here

Capacity

Lenders will want to know if you can repay the mortgage debt you incur this is known as your capacity. Lenders will base their evaluation on employment information, how long you have worked, and how much you are paid. Lenders will also review your expenses and any other debt obligations you have.

Capital

(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure

Capital expenditure or CapEx refers to large expenses that are performed infrequently but should still be budgeted for. Examples include a new roof or systems like a furnace or air conditioning unit.

Capital Gains Tax

When you sell an asset for more than you paid for it, you trigger what is called a capital gains tax.

  • Every time a seller sells a house or a land property, must pay this tax. It is a tax that is imposed on earnings the seller has gained from the sale of capital assets. It is charged at a flat tax rate of 6% of the gross selling price and must be paid within 30 days after each transaction. 
    -Capital gains tax is a type of tax applied to the profits that you earned for the sale of an asset. The capital gains tax is deducted from the property's gross selling price or market value, whichever is higher.

Capital Improvement

Capital improvement is the addition of permanent structural changes to a property that add to the property value or adapt the property to new uses.

Capitalization

In appraising, determining value of a property by considering net income and percentage or reasonable return on the investment.

Capitalization Rate aka "Cap Rate"

The capitalization rate or cap rate is used in the world of real estate investing to indicate the rate of return that an investor can expect on any given real estate investment property. This is measured by a formula based on the net income that the property is expected to produce and is calculated by dividing net operating income by the property asset value and is expressed as a percentage. This calculation is typically used by real estate investors to understand the potential ROI on an investment property. While it is a useful calculation, this should not be the only deciding factor when considering an investment property. The capitalization rate indicates the property's intrinsic, natural, and un-leveraged rate of return. 
A reasonable percentage rate or return based on net income. The capitalization rate is used to determine value.

Car Garage (CG)

The space for cars in a specific land area.

Cash Flow

In real estate terms, cash flow is the byproduct of owning a rental property and leasing it to tenants for a monthly rental income. To elaborate on this, real estate investors look for rental properties reaping positive cash flow returns, or, in other words, they invest in positive cash flow properties.

Cash On Cash Return (COCR or CCR)

A cash-on-cash return is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property.