Glossary
Real estate investment terms, formulas, and concepts.
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91 terms found
1
1 term- A tax-deferral strategy under IRC Section 1031 that allows an investor to sell an investment property and reinvest the proceeds into a "like-kind" replacement property, deferring all capital gains taxes. Strict timelines apply: 45 days to identify replacement properties and 180 days to close.
1031 Exchange
Tax
Example
An investor sells a rental for $500,000 (basis of $300,000) and uses a 1031 exchange to buy a $600,000 property, deferring the $200,000 gain.
A
7 terms- The rate at which available properties are sold in a specific market during a given time period. It is calculated by dividing the number of sales by the number of available listings. Absorption rate indicates supply-demand balance and market velocity.
- Income earned from activities in which the taxpayer materially participates, such as wages, salaries, and business income from active involvement. Active income is taxed at ordinary rates and generally cannot be offset by passive losses.
- The estimated market value of a property after all planned renovations and repairs have been completed. ARV is a critical metric for fix-and-flip investors and is typically determined by analyzing comparable sales of recently renovated properties in the area.
- The process of paying off a loan through regular periodic payments that cover both principal and interest. In the early years of an amortizing loan, a larger portion of each payment goes to interest; over time the principal portion increases.
- A professional, unbiased estimate of a property's fair market value, conducted by a licensed appraiser. Lenders require appraisals before funding a mortgage to ensure the property is worth at least the loan amount. The three main approaches are sales comparison, cost, and income.
- An increase in a property's value over time due to market forces, inflation, improvements, or changes in demand. Appreciation can be natural (market-driven) or forced (through renovations and operational improvements). Forced appreciation is a key component of value-add investment strategies.
- The legal transfer of a purchase contract from the original buyer (assignor) to a new buyer (assignee), typically in exchange for an assignment fee. This is the primary mechanism used in wholesale real estate transactions.
Absorption Rate
Market
Formula
Absorption Rate = Sales per Month / Total Active Listings
Example
A market with 600 active listings and 100 sales per month has a 6-month supply (600 / 100). An absorption rate over 20% suggests a seller's market.
Active Income
Tax
After Repair Value (ARV)
Financial
Formula
ARV = Average Adjusted Comp Price (based on 3-5 comparable sales)
Example
Three recently renovated comps sold for $280K, $295K, and $305K. The average adjusted value is $293,333, so the subject ARV is approximately $293,000.
Amortization
Financial
Example
A 30-year mortgage at 6% starts with ~83% of the first payment going to interest. By year 15, the split is roughly 50/50.
Appraisal
Market
Appreciation
Market
Assignment (of Contract)
Legal
B
6 terms- A unit of measurement equal to 1/100th of one percentage point (0.01%). Used extensively in finance and lending to describe small changes in interest rates or yields. 100 basis points equals 1%.
- In a 1031 exchange, "boot" refers to any non-like-kind property received, including cash proceeds, debt relief, or personal property. Boot is taxable in the year of the exchange, even when the rest of the transaction qualifies for tax deferral.
- The occupancy level at which a property's income exactly covers all operating expenses and debt service. A lower BER means the property can sustain higher vacancy before generating losses.
- A short-term financing solution used to "bridge" the gap between two transactions, such as purchasing a new property before selling an existing one. Bridge loans typically have terms of 6-12 months and may carry higher rates than permanent financing.
- An acronym for Buy, Rehab, Rent, Refinance, Repeat -- a strategy that combines fix-and-flip renovation with long-term rental ownership. The investor purchases a distressed property, rehabs it, rents it out, refinances at the new (higher) appraised value to recover invested capital, and uses that capital to repeat the process.
- A long-term investment strategy focused on acquiring rental properties for ongoing cash flow, appreciation, tax benefits, and mortgage paydown. Buy-and-hold investors prioritise stable markets, quality tenants, and properties that generate positive monthly cash flow.
Basis Points (bps)
Financial
Example
An interest rate increase from 6.50% to 6.75% is a 25 basis point (bps) increase.
Boot
Tax
Example
An investor sells for $500,000 and buys a replacement for $450,000 in a 1031 exchange. The $50,000 difference is boot and is subject to capital gains tax.
Break-Even Ratio (BER)
Financial
Formula
BER = (Operating Expenses + Debt Service) / Gross Operating Income
Example
Operating expenses $20,000, debt service $30,000, gross income $60,000. BER = ($20,000 + $30,000) / $60,000 = 83.3%.
Bridge Loan
Lending
BRRRR Strategy
Strategy
Buy-and-Hold
Strategy
C
14 terms- Major, non-recurring expenses for improvements or replacements that extend the useful life of a property. Examples include roof replacement, HVAC systems, parking lot repaving, and structural repairs. CapEx is distinct from routine operating expenses.
- The profit realised from the sale of a capital asset (such as real property) when the sale price exceeds the adjusted cost basis. Short-term capital gains (assets held less than 1 year) are taxed at ordinary income rates; long-term gains (held over 1 year) receive preferential tax rates of 0%, 15%, or 20% depending on income level.
- The ratio of a property's net operating income (NOI) to its current market value or purchase price. Cap rate is used to estimate the potential return on an investment property, independent of financing.
- Liquid funds set aside by a property owner or investor to cover unexpected expenses, vacancies, or economic downturns. Lenders often require 3-6 months of mortgage payments as cash reserves when qualifying borrowers for investment property loans.
- The annual pre-tax cash flow from an investment property divided by the total cash invested (down payment, closing costs, and any rehab paid out of pocket). Unlike cap rate, cash-on-cash accounts for the effects of leverage.
- A document issued by a local government certifying that a building complies with all applicable building codes, zoning laws, and regulations and is safe for occupancy. A CO is typically required before a property can be legally occupied or used for its intended purpose.
- Fees and expenses paid at the closing of a real estate transaction, above and beyond the purchase price. Buyer closing costs typically include loan origination, appraisal, title search, title insurance, escrow fees, recording fees, and prepaid items (taxes, insurance). Seller costs include real estate commissions and transfer taxes.
- The ratio of all mortgage liens on a property to its appraised value. CLTV includes first mortgages, second mortgages, HELOCs, and any other secured debt against the property.
- Recently sold properties similar to a subject property in terms of location, size, condition, and features. Comps are the primary basis for appraisals, ARV estimates, and pricing decisions. Ideally, comps should be within 0.5-1 mile and sold within the last 3-6 months.
- A short-term loan used to finance the construction or major renovation of a property. Funds are typically disbursed in stages (draws) as construction milestones are completed. Upon completion, the loan is either paid off or converted to permanent financing.
- A condition written into a purchase contract that must be met for the transaction to proceed. Common contingencies include financing, appraisal, inspection, and title contingencies. If a contingency is not met, the buyer can typically withdraw without forfeiting earnest money.
- A mortgage that is not insured or guaranteed by a government agency (FHA, VA, USDA). Conventional loans typically require higher credit scores (620+), larger down payments (5-20%+), and meet conforming guidelines set by Fannie Mae or Freddie Mac.
- The original cost of an asset for tax purposes, including the purchase price plus certain capitalised costs (closing costs, improvements). Basis is adjusted over time for depreciation (reducing it) and capital improvements (increasing it). The adjusted basis is used to calculate capital gains upon sale.
- An engineering-based tax strategy that reclassifies portions of a building into shorter-lived asset categories (5, 7, and 15-year property) to accelerate depreciation deductions. Components like cabinetry, flooring, landscaping, and parking surfaces can often be reclassified, front-loading tax savings.
Capital Expenditures (CapEx)
Financial
Example
A $12,000 roof replacement is a CapEx item, while a $200 gutter cleaning is an operating expense (OpEx).
Capital Gains
Tax
Formula
Capital Gain = Sale Price - Selling Costs - Adjusted Basis
Capitalization Rate (Cap Rate)
Financial
Formula
Cap Rate = NOI / Property Value
Example
A property generates $48,000 in annual NOI and is valued at $600,000. Cap Rate = $48,000 / $600,000 = 8.0%.
Cash Reserves
Financial
Cash-on-Cash Return
Financial
Formula
Cash-on-Cash = Annual Pre-Tax Cash Flow / Total Cash Invested
Example
An investor puts $80,000 cash into a rental that produces $9,600/yr in pre-tax cash flow. Cash-on-Cash = $9,600 / $80,000 = 12%.
Certificate of Occupancy (CO)
Legal
Closing Costs
Financial
Example
Buyer closing costs typically range from 2-5% of the purchase price; seller costs range from 6-10% (including agent commissions).
Combined Loan-to-Value (CLTV)
Financial
Formula
CLTV = (First Mortgage + Second Mortgage + ... ) / Property Value
Example
Property worth $500,000 with a $350,000 first mortgage and a $50,000 HELOC. CLTV = ($350,000 + $50,000) / $500,000 = 80%.
Comparable Sales (Comps)
Market
Construction Loan
Lending
Contingency
Legal
Conventional Loan
Lending
Cost Basis
Tax
Formula
Adjusted Basis = Purchase Price + Capital Improvements - Accumulated Depreciation
Cost Segregation
Tax
Example
A $1M building undergoes cost segregation. 20% is reclassified as 5-year property, 10% as 15-year property, generating $80,000+ in first-year deductions versus $36,364 under straight-line.
D
9 terms- The number of days a property has been listed for sale on the market. DOM is a key market health indicator -- lower DOM suggests a seller's market with high demand, while higher DOM indicates a buyer's market. Average DOM varies by market and price point.
- A lending metric that compares a property's net operating income to its total annual debt service (mortgage payments). Lenders typically require a DSCR of 1.20 or higher to approve a loan, meaning the property generates 20% more income than needed to cover the debt.
- A lending metric that divides the property's NOI by the total loan amount. Unlike DSCR, debt yield is independent of interest rate and amortization period, making it useful for comparing loan risk across different terms.
- A personal finance metric comparing a borrower's total monthly debt payments to gross monthly income. Lenders use DTI to assess a borrower's ability to manage additional debt. Conventional loans typically require a DTI below 43-45%.
- A legal document that transfers ownership (title) of real property from one party to another. Common types include warranty deeds (full guarantees), special warranty deeds (limited guarantees), and quitclaim deeds (no guarantees).
- A non-cash tax deduction that allows property owners to recover the cost of an income-producing property over its useful life. Residential rental property is depreciated over 27.5 years using the straight-line method; commercial property over 39 years.
- A transaction strategy where a wholesaler actually purchases the property (A-to-B transaction) and then immediately resells it to the end buyer (B-to-C transaction), often on the same day. Double closings are used when assignment is not permitted or the wholesaler wants to keep their profit private.
- A loan product designed for investment properties that qualifies the borrower based on the property's debt service coverage ratio rather than the borrower's personal income. DSCR loans are popular with investors who have multiple properties or non-traditional income sources.
- The comprehensive investigation and analysis a buyer performs on a property before completing a purchase. Due diligence includes physical inspections, title searches, environmental assessments, financial analysis, zoning verification, and review of leases and contracts.
Days on Market (DOM)
Market
Debt Service Coverage Ratio (DSCR)
Financial
Formula
DSCR = NOI / Annual Debt Service
Example
NOI is $60,000/year and annual mortgage payments total $48,000. DSCR = $60,000 / $48,000 = 1.25x.
Debt Yield
Financial
Formula
Debt Yield = NOI / Loan Amount
Example
NOI of $75,000 with a $750,000 loan. Debt Yield = $75,000 / $750,000 = 10%.
Debt-to-Income Ratio (DTI)
Financial
Formula
DTI = Total Monthly Debt Payments / Gross Monthly Income
Example
Monthly debts total $2,800 and gross monthly income is $8,000. DTI = $2,800 / $8,000 = 35%.
Deed
Legal
Depreciation
Tax
Formula
Annual Depreciation = Depreciable Basis / Useful Life (27.5 or 39 years)
Example
A residential rental with a $275,000 depreciable basis yields $10,000/yr in depreciation deductions ($275,000 / 27.5).
Double Close (Simultaneous Close)
Strategy
DSCR Loan
Lending
Due Diligence
Legal
E
5 terms- A good-faith deposit made by a buyer when submitting an offer to purchase real property. Earnest money demonstrates the buyer's seriousness and is typically held in escrow. If the deal closes, it is credited toward the purchase price; if the buyer defaults, it may be forfeited to the seller.
- Any claim, lien, easement, restriction, or liability attached to real property that may diminish its value or limit its use. Encumbrances do not necessarily prevent transfer of title but must be disclosed.
- The difference between a property's fair market value and the total amount owed on it. Equity increases as the mortgage is paid down and/or the property appreciates in value.
- The ratio of total distributions received from an investment to the total equity invested. An equity multiple of 2.0x means the investor doubled their money over the life of the investment.
- A neutral third-party arrangement in which funds, documents, or other assets are held until specific contractual conditions are met. In real estate, escrow typically refers to the account held by a title or escrow company during the closing process, as well as the ongoing account a lender maintains for property taxes and insurance.
Earnest Money
Legal
Example
A buyer submits a $5,000 earnest money deposit on a $300,000 purchase, representing approximately 1.7% of the purchase price.
Encumbrance
Legal
Equity
Financial
Formula
Equity = Property Value - Outstanding Mortgage Balance(s)
Example
A property worth $350,000 with a $220,000 mortgage balance has $130,000 in equity.
Equity Multiple
Financial
Formula
Equity Multiple = Total Distributions / Total Equity Invested
Example
An investor contributes $100,000 and over 5 years receives $50,000 in cash flow plus $170,000 at sale = $220,000 total. Equity Multiple = $220,000 / $100,000 = 2.2x.
Escrow
Legal
F
3 terms- A mortgage insured by the Federal Housing Administration that allows lower down payments (as low as 3.5%) and more flexible credit requirements. FHA loans are popular with first-time homebuyers and house-hackers but require mortgage insurance premiums (MIP).
- An investment strategy involving the purchase of a distressed or undervalued property, renovating it to increase its value, and reselling it for a profit within a relatively short timeframe (typically 3-9 months). Success depends on accurate ARV estimation, renovation budgeting, and market timing.
- The legal process by which a lender seizes and sells a property to recover the outstanding balance of a defaulted loan. Foreclosure timelines and procedures vary by state (judicial vs. non-judicial). Properties at or near foreclosure can present investment opportunities.
FHA Loan
Lending
Fix-and-Flip
Strategy
Foreclosure
Legal
G
1 term- A quick valuation metric that divides a property's price by its annual gross rental income. Lower GRMs suggest better value, though the metric does not account for operating expenses, vacancy, or financing.
Gross Rent Multiplier (GRM)
Financial
Formula
GRM = Property Price / Annual Gross Rent
Example
A property priced at $300,000 with $36,000/yr gross rent has a GRM of 8.3.
H
2 terms- A short-term, asset-based loan provided by private lenders or companies, primarily secured by the property itself rather than the borrower's creditworthiness. Hard money loans typically feature higher interest rates (8-15%), lower LTV (60-75%), shorter terms (6-24 months), and faster closings (days vs. weeks).
- A strategy in which the owner occupies one unit (or room) of a multi-unit property and rents out the remaining units to offset or eliminate their own housing costs. House hacking allows access to owner-occupied financing (lower down payments and rates) while building a rental portfolio.
Hard Money Loan
Lending
House Hacking
Strategy
I
3 terms- A professional examination of a property's physical condition, typically performed during the due diligence period. A general home inspection covers structural, mechanical, electrical, plumbing, and exterior systems. Specialized inspections may include termite, radon, mold, sewer scope, and foundation assessments.
- The cost of borrowing money, expressed as a percentage of the principal. In real estate, interest is typically quoted as an annual rate and calculated monthly. Interest payments on investment properties are generally tax-deductible.
- The annualised effective compounded return rate that makes the net present value (NPV) of all cash flows (both inflows and outflows) from a particular investment equal to zero. IRR accounts for the time value of money and is widely used to compare investments with different hold periods.
Inspection
Construction
Interest
Financial
Internal Rate of Return (IRR)
Financial
Formula
0 = Sum of [ CF_t / (1 + IRR)^t ] for t = 0 to n
Example
An investor puts $100,000 into a deal, receives $10,000/yr for 5 years, and sells for $130,000 at the end. The IRR that zeroes out the NPV is approximately 14.2%.
L
3 terms- The use of borrowed capital (debt) to increase the potential return on an investment. In real estate, leverage allows investors to control assets worth more than their invested capital. While leverage amplifies returns in appreciating markets, it also amplifies losses in declining markets.
- A legal claim or encumbrance on a property that serves as security for a debt or obligation. Liens must typically be satisfied (paid off) before a property can be sold with clear title. Common liens include mortgage liens, tax liens, mechanics' liens, and judgment liens.
- The ratio of a mortgage loan amount to the appraised value or purchase price of a property (whichever is lower). A higher LTV means more leverage but also more risk for the lender, typically resulting in higher interest rates or required mortgage insurance.
Leverage
Financial
Example
An investor buys a $400,000 property with $80,000 down (5x leverage). If the property appreciates 10% ($40,000), the ROI on cash invested is 50% ($40,000 / $80,000).
Lien
Legal
Loan-to-Value Ratio (LTV)
Financial
Formula
LTV = Loan Amount / Property Value
Example
A property is worth $400,000 and the loan is $300,000. LTV = $300,000 / $400,000 = 75%.
M
2 terms- The highest price an investor should pay for a property to maintain their target profit margin. The 70% rule is the most common guideline: MAO = ARV * 70% - Repair Costs.
Maximum Allowable Offer (MAO)
Strategy
Formula
MAO = ARV * 0.70 - Estimated Repair Costs
Example
ARV is $300,000 and repairs are estimated at $40,000. MAO = ($300,000 * 0.70) - $40,000 = $170,000.
N
2 terms- The total income a property generates from operations after deducting all operating expenses, but before mortgage payments, depreciation, and income taxes. NOI is the cornerstone metric for evaluating investment properties.
- The difference between the present value of future cash inflows and the present value of cash outflows over a given time period. A positive NPV indicates the investment is expected to generate value above the required discount rate.
Net Operating Income (NOI)
Financial
Formula
NOI = Gross Rental Income - Vacancy Loss - Operating Expenses
Example
Gross rent is $5,000/mo ($60,000/yr), vacancy loss is $3,000/yr, operating expenses are $18,000/yr. NOI = $60,000 - $3,000 - $18,000 = $39,000.
Net Present Value (NPV)
Financial
Formula
NPV = Sum of [ CF_t / (1 + r)^t ] - Initial Investment
Example
Discount rate is 8%. Cash flows of $12,000/yr for 5 years plus $150,000 sale proceeds. NPV = present value of all inflows minus the $120,000 initial cost.
O
3 terms- The ratio of total operating expenses to gross operating income. A lower OER indicates more efficient property management. Typical multifamily OERs range from 35-50%.
- The day-to-day costs required to operate and maintain an investment property. OpEx includes property management fees, maintenance, insurance, property taxes, utilities (if owner-paid), landscaping, and other recurring expenses. Mortgage payments are excluded.
- A negotiated timeframe (common in Texas and some other states) during which a buyer has the unrestricted right to terminate a purchase contract, typically in exchange for a non-refundable option fee. This period is used for inspections and due diligence.
Operating Expense Ratio (OER)
Financial
Formula
OER = Operating Expenses / Gross Operating Income
Example
Operating expenses of $22,000 on gross income of $55,000 yields an OER of 40%.
Operating Expenses (OpEx)
Financial
Option Period
Legal
P
9 terms- Income derived from rental activity or a business in which the taxpayer does not materially participate. Under IRS rules, passive losses can generally only offset passive income, unless the taxpayer qualifies as a Real Estate Professional or meets income-based exceptions.
- The fixed periodic payment required to fully amortize a loan over its term at a given interest rate. PMT includes both principal and interest components and remains constant throughout the loan term for a fixed-rate mortgage.
- A formal approval issued by a local government allowing specific construction, renovation, or demolition work on a property. Permits ensure work complies with building codes, zoning laws, and safety standards. Working without required permits can result in fines, forced removal of improvements, or issues at resale.
- An environmental investigation of a property to identify potential or existing contamination liabilities. A Phase I ESA involves reviewing historical records, site reconnaissance, interviews, and government database searches. It does not involve physical sampling. If concerns are found, a Phase II ESA with testing may be recommended.
- A mortgage loan that is originated and retained by the lender rather than being sold on the secondary market. Portfolio lenders have more flexibility on underwriting criteria, making these loans useful for non-conforming deals, unique properties, or borrowers who exceed conventional loan limits.
- The original sum of money borrowed on a loan, or the remaining balance that has yet to be repaid. Each mortgage payment reduces the principal by a small amount, with the remainder covering interest.
- Loans from individual investors or non-institutional sources, often based on personal relationships. Private money terms are negotiable and typically fall between hard money (higher rate, asset-based) and conventional financing (lower rate, income-based).
- A projected financial statement for an investment property that estimates future income, expenses, and returns based on assumptions. Pro formas are used to evaluate deals, attract investors, and plan financing. It is important to stress-test pro forma assumptions.
- The operation, oversight, and administration of residential or commercial real estate, including tenant relations, rent collection, maintenance, leasing, and financial reporting. Property management can be self-managed or outsourced to a professional management company, typically for 8-12% of collected rents.
Passive Income
Tax
Payment (PMT)
Financial
Formula
PMT = PV * [ r(1+r)^n ] / [ (1+r)^n - 1 ]
Example
A $250,000 loan at 6.5% for 30 years has a monthly payment of approximately $1,580.
Permit
Legal
Phase I Environmental Site Assessment (ESA)
Construction
Portfolio Loan
Lending
Principal
Financial
Private Money
Lending
Pro Forma
Financial
Property Management
Strategy
R
5 terms- The recurring pattern of expansion, hyper-supply, recession, and recovery that characterises real estate markets. Understanding where a market sits in its cycle helps investors time acquisitions, dispositions, and financing decisions.
- A property that has been acquired by a lender (typically a bank) through the foreclosure process after failing to sell at a foreclosure auction. REO properties are owned by the lender and are often sold at a discount, though they may require significant repairs.
- A fee charged by a county or local government office to officially record a real estate transaction in the public records. This typically includes recording the deed, mortgage, and other documents related to the transfer of property.
- A document listing all rental units in a property, current tenants, lease terms, rental rates, security deposits, and any concessions. The rent roll is a critical due-diligence document for evaluating income-producing properties.
- A simple measure of the profitability of an investment expressed as a percentage. In real estate, ROI can be calculated in several ways depending on whether you include appreciation, tax benefits, or just cash returns.
Real Estate Market Cycle
Market
Real Estate Owned (REO)
Market
Recording Fee
Financial
Rent Roll
Financial
Return on Investment (ROI)
Financial
Formula
ROI = (Net Profit / Total Investment) * 100
Example
Total investment of $50,000 generates $7,500 in annual net profit. ROI = ($7,500 / $50,000) * 100 = 15%.
S
6 terms- A transaction in which the property seller acts as the lender, carrying back a note secured by the property instead of the buyer obtaining a traditional mortgage. Terms are negotiable between buyer and seller, offering flexibility on interest rate, term, and down payment.
- A sale of real property in which the proceeds fall short of the balance owed on the property's loan. The lender must agree to accept less than what is owed. Short sales are alternatives to foreclosure and can provide opportunities for investors, though the approval process is often lengthy.
- The difference between two interest rates or yields. In real estate lending, spread often refers to the margin a lender adds above a benchmark rate (such as the 10-year Treasury or SOFR) to determine the loan's interest rate.
- A creative acquisition strategy where the buyer takes title to a property "subject to" the existing mortgage remaining in place in the seller's name. The buyer makes the mortgage payments but does not formally assume the loan. This approach carries due-on-sale clause risk.
- A professional measurement and mapping of a property's boundaries, structures, and physical features. Surveys identify the exact property lines, easements, encroachments, and can reveal discrepancies between the legal description and actual conditions.
- A pooled investment structure where a sponsor (General Partner / GP) raises capital from passive investors (Limited Partners / LPs) to acquire, manage, and eventually sell a larger real estate asset. Syndications are governed by SEC regulations and typically structured as LLCs or limited partnerships.
Seller Financing
Lending
Short Sale
Market
Spread
Financial
Example
If the 10-year Treasury yields 4.2% and the lender quotes 6.7%, the spread is 250 basis points (2.50%).
Subject-To Financing
Lending
Survey
Construction
Syndication
Strategy
T
4 terms- The legal right to own, use, and dispose of real property. A "clear title" means there are no liens, encumbrances, or legal questions about who owns the property. Title searches are performed before closing to identify any issues.
- An insurance policy that protects the insured party (owner or lender) against financial loss due to defects in the property's title, such as undisclosed liens, forgeries, errors in public records, or unknown heirs. A lender's policy is typically required; an owner's policy is optional but recommended.
- A state or local tax imposed on the transfer of real property from one owner to another, typically calculated as a percentage of the sale price or a flat fee per transaction. Also known as a documentary stamp tax, conveyance tax, or excise tax depending on jurisdiction.
- A fully renovated, tenant-occupied property sold to an investor as a passive investment requiring minimal immediate work. Turnkey providers handle acquisition, renovation, tenant placement, and often ongoing property management.
Title
Legal
Title Insurance
Financial
Transfer Tax
Financial
Turnkey Property
Strategy
V
3 terms- A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible service members, veterans, and surviving spouses. VA loans offer zero down payment, no private mortgage insurance, and competitive rates.
- The percentage of time a rental property is unoccupied and not generating income. Investors typically underwrite a vacancy factor of 5-10% of gross rents to account for tenant turnover, marketing periods, and make-ready time between leases.
- An investment strategy focused on properties that can be improved through renovations, better management, repositioning, or operational efficiencies to increase NOI and property value. Value-add deals carry moderate risk but offer higher returns than stabilised "core" investments.
VA Loan
Lending
Vacancy Rate
Financial
Formula
Vacancy Rate = Vacant Units / Total Units (or Vacant Months / 12)
Example
A 10-unit building with 1 unit vacant has a 10% vacancy rate.
Value-Add
Strategy
W
2 terms- An investment strategy in which an investor (wholesaler) contracts to purchase a property and then assigns that contract to an end buyer for a fee, without ever taking title to the property. Wholesaling requires strong deal-finding skills, accurate ARV estimation, and an active buyer network.
- A seller-financing arrangement where the seller creates a new mortgage that "wraps around" the existing mortgage. The buyer makes one payment to the seller, who continues making payments on the original loan. The seller profits from the spread between the two interest rates.
Wholesale
Strategy
Wrap Mortgage (All-Inclusive Trust Deed)
Lending
Z
1 term- Municipal regulations that dictate how a parcel of land can be used (residential, commercial, industrial, mixed-use, agricultural, etc.). Zoning also controls building density, setbacks, height limits, and parking requirements. Investors must verify zoning before purchasing to ensure their intended use is allowed.
Zoning
Legal