Glossary
The terms PisoMetric uses, explained without jargon.
- Acquisition cost
- Purchase price plus purchase taxes and costs, renovation, furnishing and other upfront costs.
- ADR
- Average daily rate: the average rate per occupied night in a short-term rental, excluding the cleaning fee.
- APR
- Annual percentage rate: includes interest, fees and payment frequency. PisoMetric does not use it to calculate the payment.
- Break-even point
- The value of a variable (for example, occupancy) at which annual cash flow would be exactly 0.
- Break point
- The value of a variable (price, rent, vacancy, expenses or nominal rate) beyond which the deal stops meeting your goals.
- Cash flow
- What is left each month (or year) after paying the property’s expenses and the mortgage payments. It can be negative.
- Cash-on-cash
- Annual cash flow divided by upfront capital. Measures the return on the money you put in yourself.
- DSCR
- Debt service coverage ratio: NOI divided by annual mortgage payments. Below 1, the property does not cover the mortgage on its own.
- Gross yield
- Annual rent divided by purchase price. The figure usually quoted in listings: it ignores expenses and vacancy.
- LTC
- Loan to cost: the percentage of the total acquisition cost that is financed.
- LTV
- Loan to value: the percentage of the price financed by the mortgage. PisoMetric calculates it on the purchase price.
- Net yield
- NOI divided by acquisition cost. It accounts for expenses, vacancy and purchase costs, but not financing or personal taxes.
- NOI
- Net operating income: the property’s income minus its operating expenses, before mortgage and personal taxes.
- Nominal interest rate
- The loan’s nominal annual interest rate. It determines the payment on a fixed-payment loan.
- Occupancy
- In a short-term rental, the percentage of available nights that are booked.
- Property tax
- A recurring tax the owner pays for holding the property. Its name and amount depend on each country and municipality.
- Purchase taxes and costs
- Transfer taxes or value-added tax, notary, land registry, administrative agency fees and similar. They depend on the country, the region and the type of transaction.
- Simple payback
- Years needed to recover the upfront capital from current cash flow. An approximation with no discounting or appreciation.
- Stress test
- A simulation of a downturn (lower rent, more vacancy, higher expenses or higher interest) to see how much the deal can withstand.
- Upfront capital
- Money you put in out of pocket to close the deal: acquisition cost plus mortgage costs minus what the bank finances.
- Vacancy
- Time the property sits unrented. For long-term rentals it is expressed as months rented per year.
The exact formulas are in the methodology.