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#### What does PITI mean?

 

PITI stands for Principal, Interest, Taxes and Insurance. Aside from maintenance, these are the core expenses of owning a house. Typically, your monthly payment to your lender or mortgage servicer includes all of these costs.

 

For example, let's say you buy a home for $250,000 with a 5% down payment on a mortgage loan at 3% interest, 1% [PMI](https://www.offermarket.us/real-estate-glossary/pmi), 1% property tax and $1,000/month property insurance. Using our [mortgage calculator](https://www.offermarket.us/tools/mortgage-calculator), you can see that your monthly PITI would be just under $1,500.

PITI stands for mortgage principal, interest, taxes and insurance. Learn more about PITI at OfferMarket.

PITI - Principal Interest Taxes and Insurance - Real Estate Glossary

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PITI - Real Estate Glossary - OfferMarket

What is PITI in real estate? 

#### What does LTV mean?

 

LTV means loan-to-value ratio. This is the amount of loan divided by the appraised value of the property. This is the metric used by lenders including banks and [private lenders](https://www.offermarket.us/real-estate-glossary/private-lender) to determine the maximum loan a borrower can receive.

 

#### How to calculate LTV?

 

To calculate the loan to value ratio, simply divide the loan amount by the appraised value. 

 

For example, if an investment property appraises at $100,000, and the maximum LTV is 75%, then the lender is able to provide up to $75,000 loan. This means the borrower will retain $25,000 of equity in the property and will be responsible for servicing (paying down) a $75,000 loan plus the interest charged by the lender.

 

#### Related concepts

 

LTV is a fundamentally important consideration when taking on a real estate investment. Rental property investors that use the [BRRR](https://www.offermarket.us/real-estate-glossary/brrr-buy-rehab-rent-refinance) method try to build enough equity during the [rehab](https://www.offermarket.us/real-estate-glossary/rehab) phase to pull out all of their cash investment via a [cash out refinance](https://www.offermarket.us/real-estate-glossary/cash-out-refinance).

LTV stands for loan-to-value and is a metric used by lenders to determine loan limits.

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LTV - Real Estate Glossary - OfferMarket

What is LTV in real estate?

Net Yield is a metric that shows the current net income return on the value of an investment.

 

## Why is Net Yield important?

 

Net yield is important because it allows an investor to compare a specific rental property to other available investments, whether they are other rental properties or stocks or bonds. 

 

## How to calculate Net Yield

 

**Net Annual Rent ÷ Current Market Value (what you will have to pay for the property)**

 

## How to calculate Net Annual Rent

 

Gross Rent - Expenses

 

**Net Annual Rent** is the total rent revenue collected minus all expenses (see below). Current Market Value is the appraised or estimated value based on comparable properties ([comps](https://offermarket.us/real-estate-glossary/comps)). Also referred to as Net Rental Yield, this metric helps rental property investors understand the expected performance of a rental property relative to other investments on a net income basis. This is a very useful metric because it takes into account cash flow that will be produced by the property, takes out expected expenses such as maintenance costs and interest expenses and divides it by the capital outlay you will have to make to acquire this property. 

 

### Expenses

 

- Mortgage principle, interest, taxes, insurance (["PITI"](https://www.offermarket.us/real-estate-glossary/piti)
- [Landlord insurance](https://www.offermarket.us/real-estate-glossary/landlord-insurance)
- [Property management](https://www.offermarket.us/blog/offermarket-podcast-how-to-invest-in-real-estate-with-stewart-beal)
- Maintenance
- Vacancy
- Uncollectible rent

 

## Net Yield Formula

 

A more detailed formula for Net Yield: 

**(Gross Rent - Expenses) ÷ Current Market Value**

 

## Example of Net Yield

 

If you own a single family rental property worth $100,000 with $10,000 per year in gross rent (total rent) and $6,000 per year in expenses: your net yield is 4%. That's ($10,000 - $6,000) ÷ $100,000, which is $4,000 ÷ $100,000 or 4%.

 

## Do rental property investors use Net Yield

 

Yes! It's an important metric that helps rental and real estate investors to compare their investment opportunities to one another, holding all other factors constant. Net Yield can't be used in vacuum and should only be used as part of a comprehensive and holistic analysis where other metrics are also used to paint the full picture of the investment opportunity that is being dissected. 

 

## What is the difference between Gross Yield and Net Yield

 

These are two different mathematical formulas that carry different implications for the analysis of the investment opportunity at hand. One big difference between Gross Yield and Net Yield is that Gross Yield doesn't take into account expenses. It's a much simpler formula that just looks at cash inflows and divides them by the capital invested. This is a faster, less precise metric that distorts the comparative value of investments. Two properties might look similarly attractive on Gross Yield basis, but once you factor in expenses (such as maintenance of an older property, or difference in mortgage expenses due to loans you were able to secure in different parts of county) and calculate the Net Yield, two investment opportunities might start to look vastly different. 

 

## How to use Net Yield as a tool to measure your investment?

Net Yield is a total return you receive while owning a property, while ignoring future changes to your assumptions (such as maintenance expenses and interest expenses). Larger Net Yield indicates that the owner will recoup their initial capital outlay faster between comparable investment opportunities. Quicker recoup period indicates a smaller degree of risk to the capital, since it will be recouped. However, there is an important consideration, Net Yield will look really good if the capital outlay is becoming smaller. Its important to understand while initial outlay of capital (the denominator) is smaller for the cashflow minus expenses that you are expecting to receive. Some good questions to answer are:

 

- Are property value falling? What is the trend for local real estate? 
- Why am I able to charge these rents if property values are so low?
- Will I be able to continue to charge these rents?
- Will property value appreciate or depreciate over my holding period?

 

Once answering these questions in the context of Net Yield you will have a better grasp on the risk profile of the property. Thus, higher Net Yield is not always better because of trends that might impact property value and rent collectability in the future. Keep in mind, as a rental investors you are provided a depreciation shield in the form of depreciation charge that you can use on your taxes for 27.5 years. Many rental investors use this length of time as time horizon where they will hold their property. So its good idea to use this time length in estimating your holding period and estimating how it will affect your maintenance expenses. 

 

## What are draw backs of Net Yield?

 

The largest drawback of net yield is that it looks at a point in time and doesn't consider potential changes in its assumptions. For example, what if the rent you expect to receive, changes over time (grows or shrinks due to vacancies). Yes you can somewhat capture that through uncollectible rent expense but once again, its not a precise measurement. Other property expenses can also change over time, such as property management and maintenance expenses. In fact it's guaranteed that with age, the property will require more maintenance and maintenance expenses should grow into the future. To improve the Net Yield formula, a growth factor for expenses should be incorporated, but once again, this is an assumption that isn't precise and hard to accurately estimate between properties to increase the usefulness of the Net Yield formula as a tool for evaluating investment opportunities. 

 

## Related concepts

 

- [Cash On Cash Return](https://www.offermarket.us/real-estate-glossary/cash-on-cash-return)
- [Cap Rate](https://www.offermarket.us/real-estate-glossary/cap-rate-capitalization-rate)
- [Turnkey Rental Properties](https://www.offermarket.us/real-estate-glossary/turnkey-rental-properties)

Net Yield = Net Annual Rent ÷ Current Market Value. Learn how to calculate net yield and how it's used in real estate investing.

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Net Yield - Real Estate Glossary

What is Net Yield in real estate?

#### What does FSBO mean?

 

FSBO means For Sale By Owner. This is a real estate listing format where the property owner has chosen to not be represented by a listing agent or realtor. 

 

#### Why sell For Sale By Owner?

 

Sellers decide to sell For Sale By Owner when they want to avoid the traditional 5% to 6% commission charged by the listing broker and shared with the buyer's agent.

 

#### Should I sell For Sale By Owner?

 

Selling your house by owner is not easy but if you do it properly you can save thousands of dollars. In order to sell your house successfully by owner, you need to achieve the following:

 

✅ Buyer awareness 
✅ Buyer competition 

 

Without buyer awareness and competition, you will not be able to successfully generate a purchase price close to what you would be offered when you list "on-market" with an agent.

 

That's where OfferMarket comes in. With OfferMarket you can [create your free listing](https://www.offermarket.us/sell) on our marketplace and receive multiple competitive offers, AS IS, commission free.

 

#### Related guides

 

- [How To Sell A House For Sale By Owner](https://www.offermarket.us/guides/how-to-sell-a-house-by-owner)
- [How To Sell Your House Fast Without An Agent](https://www.offermarket.us/guides/how-to-sell-your-house-fast-without-an-agent)

FSBO means For Sale By Owner. These are real estate listings where a listing agent or realtor is not involved.