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Glossary

Real estate investing, in plain English.

From LTV to NOI to DSCR. Every term you need to underwrite, finance, and operate real estate. Built for the seller-finance operator, but useful to anyone.

A
ARV
After-Repair Value - the estimated market value of a property after all planned renovations are complete.
VALUATION
Amortization
The schedule by which a loan principal is paid down over time, with each payment split between interest and principal.
FINANCING
Appreciation
The increase in a property value over time, either through market forces (natural) or operational improvements (forced).
VALUATION
B
BRRRR
Buy, Rehab, Rent, Refinance, Repeat - a strategy for scaling a rental portfolio by recycling capital through value-add and refinance cycles.
RETURNS
Balloon Payment
A lump-sum principal payment due at the end of a loan term, typically after years of interest-only or amortizing payments.
FINANCING
C
Cap Rate
Capitalization rate - the ratio of NOI to property value, used to price and compare income-producing real estate.
VALUATION
Capital Stack
The layered structure of debt and equity funding a real estate deal, from senior debt at the bottom to common equity at the top.
FINANCING
Cash-on-Cash Return
Annual pre-tax cash flow divided by the total cash invested, expressed as a percentage.
RETURNS
CoC
Short for Cash-on-Cash Return - annual cash flow divided by cash invested. See Cash-on-Cash Return for full definition.
RETURNS
D
DSCR
Debt Service Coverage Ratio - the ratio of NOI (or rent) to annual debt service, used by lenders to size loans.
UNDERWRITING
Debt Service
The total annual principal and interest payments required on all loans secured by a property.
UNDERWRITING
Deed of Trust
A three-party legal instrument that secures a promissory note against real property, used in most western US states.
LEGAL
Due-on-Sale Clause
A mortgage provision that allows the lender to demand full repayment if the property is sold or transferred without consent.
LEGAL
E
Equity
The owner's stake in a property - the difference between the current market value and all outstanding debt.
VALUATION
Escrow
A neutral third-party account that holds funds or documents until specified conditions are met.
OPERATIONS
G
GRM
Gross Rent Multiplier - the ratio of purchase price to annual gross rent, used for quick valuation screening.
VALUATION
H
Hard Money
Short-term, asset-based loans from private lenders, typically used for acquisitions and rehab when speed is required.
FINANCING
I
IRR
Internal Rate of Return - the annualized return that makes a project's net present value equal to zero, accounting for all cash flows over t
RETURNS
Installment Sale
A sale where proceeds are received over multiple years, allowing capital gains to be spread over the payment term under IRC Section 453.
LEGAL
L
LTC
Loan-to-Cost - the ratio of loan amount to total project cost, used in construction and value-add lending.
UNDERWRITING
Land Contract
A purchase agreement where the seller retains legal title until all payments are made - also called contract for deed.
LEGAL
Loan-to-Value (LTV)
The ratio of loan balance to property value, expressed as a percentage. Lenders use LTV to set maximum loan sizes.
UNDERWRITING
M
Mortgage
A legal instrument that pledges real property as collateral for a loan, used primarily in eastern US states.
LEGAL
N
NOI
Net Operating Income - gross revenue minus operating expenses, before debt service and capital expenditures.
VALUATION
Note Servicing
Professional management of a loan's payment collection, ledgering, escrow, and year-end tax reporting by a licensed third party.
OPERATIONS
O
OpEx
Operating Expenses - all recurring costs of running a property, excluding debt service and capital expenditures.
OPERATIONS
Owner Financing
Synonym for seller financing - a transaction where the property seller provides the loan directly to the buyer.
FINANCING
P
Promissory Note
A signed legal document in which the borrower promises to repay a specific amount under defined terms.
LEGAL
R
RUBS
Ratio Utility Billing System - a method of allocating master-metered utility costs to tenants based on unit size or occupancy.
OPERATIONS
Refinance
Replacing an existing loan with a new loan - typically to pay off a seller note, lower the rate, or extract equity.
FINANCING
Rent Roll
A schedule listing each rental unit, current tenant, lease dates, rent amount, and payment status.
OPERATIONS
S
Seller Carry
The portion of the purchase price the seller agrees to finance directly, rather than requiring full cash payment.
FINANCING
Seller Financing
A transaction where the property seller provides the loan directly, eliminating the need for a traditional bank mortgage.
FINANCING
Subject-To
An acquisition where the buyer takes the deed but leaves the seller's existing mortgage in place, making payments on the seller's loan.
FINANCING
T
T-12
Trailing 12 Months - a property's actual operating income and expenses over the prior 12-month period.
OPERATIONS
Title Insurance
An insurance policy protecting against losses from defects in the property title that existed before the policy date.
LEGAL
V
Vacancy Rate
The percentage of a property's rentable units or space that is unoccupied during a given period.
UNDERWRITING
W
Wrap-Around Mortgage
A seller-financed note that includes the balance of an existing underlying mortgage, with the seller continuing to pay the underlying loan.
FINANCING
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