Real Estate Investing Cheat Sheet

The core ideas of Real Estate Investing distilled into a single, scannable reference — perfect for review or quick lookup.

PiqCue — piqcue.com/real-estate-investing/cheatsheet

Quick Reference

Cap Rate (Capitalization Rate)

A metric used to evaluate the profitability of an investment property, calculated by dividing the net operating income (NOI) by the property's current market value or purchase price. It expresses the expected rate of return independent of financing.

Cash-on-Cash Return

A measure of the annual pre-tax cash flow relative to the total cash invested, expressed as a percentage. Unlike cap rate, it accounts for financing and reflects the actual return on the investor's out-of-pocket capital.

Leverage

The use of borrowed capital (mortgages or other debt) to increase the potential return on an investment. Leverage amplifies both gains and losses, allowing investors to control larger assets with less personal capital.

Net Operating Income (NOI)

The total income generated by a property minus all operating expenses, excluding mortgage payments, depreciation, and income taxes. NOI is the fundamental measure of a property's operational profitability.

1031 Exchange

A provision in the U.S. tax code that allows an investor to defer capital gains taxes by reinvesting the proceeds from a property sale into a like-kind replacement property within specific time constraints (45 days to identify, 180 days to close).

Real Estate Investment Trust (REIT)

A company that owns, operates, or finances income-producing real estate across a range of property sectors. REITs allow individual investors to earn dividends from real estate investments without having to buy, manage, or finance properties directly.

Debt Service Coverage Ratio (DSCR)

A financial ratio that measures a property's ability to cover its debt obligations, calculated by dividing NOI by total debt service (principal and interest payments). Lenders typically require a DSCR of 1.20 or higher.

Appreciation

The increase in a property's value over time, driven by market forces (market appreciation) or by improvements made by the owner (forced appreciation). Appreciation is a primary source of wealth building in real estate alongside cash flow.

House Hacking

A strategy where the investor lives in one unit of a multi-unit property (or rents out rooms in a single-family home) while tenants pay rent that covers most or all of the mortgage, effectively reducing the investor's housing costs to near zero.

Depreciation

A non-cash tax deduction that allows real estate investors to deduct the cost of the building (not land) over its useful life, as defined by the IRS: 27.5 years for residential and 39 years for commercial property. This reduces taxable income even when the property is appreciating in market value.

Key Terms at a Glance

Amortization:The process of spreading mortgage payments over time so that each payment covers both interest and principal reduction.

Appreciation:The increase in a property's market value over time, whether from market forces or owner improvements.

BRRRR:Buy, Rehab, Rent, Refinance, Repeat: a strategy for recycling capital across multiple investment properties.

Cap Rate:Net operating income divided by property value; a measure of unlevered return potential.

Cash Flow:The net income remaining after all expenses and debt service payments have been deducted from rental income.

Cash-on-Cash Return:Annual pre-tax cash flow divided by total cash invested; measures return on actual capital deployed.

Closing Costs:Fees and expenses paid at the completion of a real estate transaction, including title insurance, appraisal, and attorney fees.

Cost Segregation:A tax strategy that accelerates depreciation by reclassifying building components into shorter depreciation schedules.

Debt Service:The total amount of principal and interest payments made on a loan over a given period.

Depreciation:A tax deduction that accounts for the wear and tear of a building over its useful life (27.5 years residential, 39 years commercial).

DSCR:Debt Service Coverage Ratio: NOI divided by annual debt service; measures ability to cover loan payments.

Due Diligence:The investigation and analysis period before purchasing a property, including inspections, financial review, and title search.

Equity:The difference between a property's market value and the outstanding mortgage balance.

FHA Loan:A government-insured mortgage allowing low down payments (3.5%) for owner-occupied properties of up to four units.

GRM:Gross Rent Multiplier: property price divided by gross annual rent; a quick valuation comparison tool.

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