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What’s the big difference between a 4 unit property and a 5 unit property ?

In a nut shell, "residential" means 1 to 4 living units, "residential multi-family" means 2-4 living units. The term "commercial multi-family" means 5 or more living units. Thus, a five unit building is considered a commercial business and subjective to more strict lending requirements (and of course, more cost).

The loan fees are higher, the appraisal fees are generally three time higher than an appraisal of a 4 unit building and the interest rate is higher on a commercial multifamily structure than a residential multifamily structure. The lending institutions and Federal Government created these categories for lending purposes.
 

What does GRM stand for ?

GRM stand for: Gross Rent Multiplier. The Gross Rent Multiplier or GRM for short, is used by many investors as a gauge in attaching a value to a property. To calculate the GRM of a duplex for example. You would divide the Sales Price by the Annual Rental Income. This would give you the GRM for that property.

Thus, a buyer/investor would need to know the local GRM of many properties in order to get an idea of what truly is the "average" GRM for this area. Once an investor knows the local area "average" GRM (or even the high and low GRM's for the area), he or she would then know if the property is over or under priced, based on the GRM figure.

You could also simply reverse the formula (GRM x Annual Rental Income = Estimated Value). Using this formula along with the resulting calculation, an Investor/Buyer would know if the potential property is over priced or under priced, based on the GRM method of valuation.

What does NOI stand for ?

NOI stand for: Net Operating Income. This is the amount left over from the Income of a property, after subtracting vacancy/collection loss and operating expenses, but before subtracting debt service and income taxes. Net Operating income is always quote in "annualized" terms. Although some software programs and analysis will break it down into monthly figures.

I have heard the term "Before Tax Cash Flow", what is it ?

Before Tax Cash Flow or better know as BTCF, is cash flow after subtracting vacancy/collection loss, all operating expenses and debt service (mortgage payment), BUT, before any income taxes. Most people would say, "is this property positive or negative cash flow". What they are really asking is "is my BTCF positive or negative on this property"