When we talk of annuity, we mean a sequence of regular payments at a set intermission for an assured number of years or even the lifetime of an individual. An annuity is something similar to an insurance or pension where an individual continues to receive payments at regular periods either for a fixed period of time or his or her entire life. In fact, while working out any investment, annuity may be considered either as an expression of 'compounding' denoting the potential worth of a sequence of regular imbursements or 'discounting' meaning the prevailing significance of a series of payments to be made in future.
In fact, any mortgage is a fine instance of an annuity in the real estate market. If you look at it from the mortgagor's point of view, a mortgage is basically reimbursing a credit. On the other hand, from the mortgagee's viewpoint, a mortgage is a kind of investment in an annuity, as the lender will be receiving a payment from the borrower at regular intervals till the maturity of the loan. In other words, the principal amount given in loan to the borrower in the beginning of the mortgage may be considered as an investment by the lender now with the legal privilege to collect payments in identical sums at fixed intervals agreed by the two parties in the future.
However, it is important to mention here that since most real estate savings yield irregular funds through the entire holding or legal possession phase, the significance of annuities and affirmed payments at expected intervals is partial for those who deal in real estate. In fact, compounding and discounting of unbalanced capital income is an essential feature of real estate venture study. Professionals engaged in commercial real estate transaction regularly study, decisively review and project the cash flows from investments on different assets. Luckily, contemporary fiscal computers and software programs practically deal with the asymmetrical functioning as well as funds derived from sales that enable comparing investments and their evaluation. It may be noted here that the capital or cash flows not only help to find out the revenue generated by a real estate, but also establish the base for important evaluation of different investment alternatives.
