Property Investing Glossary

Servicing is the process in which a financial institution collects the payments of a loan.

Underwriters are the people who approve or deny a loan application.

Title insurance protects lenders and buyers for losses that happen because of title-related issues.

Seller financing is when the seller offers a mortgage-like loan to the buyer.

A Mortgage Loan Originator (MLO) is a licensed person who can generate loans for a financial institution.

Jumbo loan is a mortgage that exceeds the limits set by Fannie Mae and Freddie Mac.

HELOCs are secured loan products that provides borrowers with a line of credit.

A Fixed Rate Mortgage has the same interest rate for the entire loan.

Home equity is the amount of the home value owned.

A rental income advance is any amount of money landlords accept before the billed period.

Discount rate is the value of the future cash flows after factoring in the net present value of money.

When a loan defaults, it means the borrower failed to repay a loan based on the established requirements.

Conforming loans are mortgages that fit criteria established by Fannie Mae and Freddie Mac.

Closing costs are fees you pay to the lender when you finalize your loan.

Cash Out Refi is a type of mortgage where when you refinance, you take a portion of the equity out as cash.

APR is a calculation of the simple yearly interest paid by the borrower.

Amortization is the process of breaking apart an asset over a loan period.

Unsecured loans are provided to borrowers without underlying collateral.

Secured loans require borrowers to put up collateral.

Adjustable Rate Mortgage (ARM) is a type of mortgage where interest can change over time.

PITI are the different pieces of a mortgage payment.

A mortgage is a secured loan used to purchase real estate.

A down payment is the partial amount a borrower pays when financing a loan.

NMLS is the licensing system for mortgage loan originators and mortgage businesses.

Hard money loans are short-term loans guaranteed by an underlying asset.

Mortgage Interest Deduction lets property investor deduct mortgage interest payments off of their taxes.

Depreciation is when a physical asset decreases in value due to wear and tear.

Rent collection is the process of charging tenants for occupying the property.

Homeowner Associations plan for and enforce rules for a community.

The Fair Housing Act guarantees fair treatment when buying, renting, and financing homes.

Eviction is the act of forcibly expelling a tenant from a property.

A quitclaim deed is when a grantor drops all claims of the property to the grantee.

Warranty deeds transfer property from sellers to buyers with the guarantee that the title is owned by the seller.

Deed is the legal document that confers ownership of the property to the holder.

A permit is a written document that lets property investors make a major modification to their home.

A sublease is a lease contract between a tenant and a subtenant.

Property title is the legal ownership of the property.

Zoning codes are regulations that determine how land can be used and what can be built.

Cash for Keys is when a property investor provides a cash incentive for an existing tenant to move out.

Tenant screening is the process of checking a prospective tenant's credit, criminal, and eviction history.

A squatter is anyone who illegally occupies an unused building or land.

Unlevered yield is the return on investment a investor gets without the use of debt.

A month-to-month (M2M) lease does not have an end date and can be active indefinitely.

A security deposit is the money a landlord can hold in the event of a tenant's damages or failure to pay rent.

Rental income is any payment landlords receive for the use of the property.

A LLC is a hybrid business structure combining corporations and partnerships.

A rental lease is a contract that allows a tenant to live in a property owned by a landlord.

CapEx is an expense incurred for acquisition, improvement, or replacement of long-term assets.

A real estate broker is a licensed individual who real estate agents work for.

Bookkeeping is the act of keeping financial records and transactions organized.

Amenity is a feature on a property that makes it more desirable to live in.

Property developers renovate and build properties for a higher value.

Vacancy rate is a measure of how often you investment property is unoccupied when it could be.

MLS are databases maintained by agents and brokers to facilitate property sales and purchases.

Property managers are individuals or businesses hired to oversee the rental property operations.

The Debt Service Coverage Ratio measures the property's ability to cover its expenses.

The IRR is the return of a property investment discounted by the time invested.

The Expense ratio is a ratio measuring operating expenses to gross income.

Bonus depreciation allows property investors to immediately depreciate eligible assets.

The Statement of Cash Flows details cash moving into and out of the business.

The Income Statement, also known as the P&L, shows how much money is earned or lost in the business.

Rental comps are used by property investors to know how much rent to charge.

Pro Formas are financial projections for a selected investment.

The Net Operating Income is a measure of a property's profitability.

Cap rate is a calculation of the property's expect net operating income relative to the market value.

Cash-on-cash is the cash earned relative to the cash invested in a property.

ROI is a measurement on the net profit of an investment over a period of time.

After Repair Value is the value of the property after any repairs and add-ons.

Free cash flow is the company's cash flow subtracted by any capital expenditures.

Cash flow is the total amount of gross cash a business generates less any expenses.

50% rule is a metric property investors use to estimate expected operating expenses.

The gross rent multiplier helps lenders estimate how fast a loan can be paid off with rental income.

1% Rule is a guideline where rentals generate at least 1% of its purchase price in rent.

Debt to Income is a ratio of monthly liabilities versus earnings.

Loan to Value measures property risk and is a ratio of the loan amount to the property value.

A wire transfer allows banks and financial institutions transfer money worldwide.

Virtual cards are payment cards that can only be accessed through web or mobile.

Physical cards are regular, often plastic, cards issued by banks to spend on.

Neobanks are digital-only banks that stores deposits through a sponsor bank.

The FDIC is a Congressional agency that supplies deposit insurance in the event of bank failures.

A bank holiday is a business day where banks and other financial institutions are closed.

ACH is a electronic network for processing money transfers via debits and credits.

The Tenant Security Account is a dedicated account opened to store tenant security deposits.

Umbrella insurance is a form of liability coverage that applies on top of traditional insurance coverages.

Renter's insurance protects tenants of belongings and liabilities in their unit.

Private Mortgage Insurance protects lenders when borrowers put up a down payment less than 20%.

Landlord's insurance is a rental property insurance that covers liabilities for property owners.

Homeowners insurance protects individuals of losses to the covered property.

House flipping, or Rehab, is when an investor buys a distressed property, fixes it up, and then sells it again.

Appraisers assess the fair market value of a property.

Arms length is a type of transaction where the buyer and seller are unaffiliated.

Non-Arms length is a type of transaction where the buyer and seller have a personal relationship.

Earnest money is a cash deposit buyers put down to demonstrate a sincere offer.

1031 Exchanges defer capital gains taxes when the investor exchanges a qualified property.

FIRE is a movement and battlecry for living frugally to retire early.

In real estate, a wholesaler re-assigns the purchase contract to another interested buyer.

Turnkey is a strategy for investing in properties that are already operational and has tenants.

A real estate syndicate is when a group of investors pool money together to buy real estate.

Single Family Rentals are rental properties with only one single unit.

Schedule E is an IRS tax form that lets property investors report rental income and losses.

REITs, or Real Estate Investment Trusts, are funds that invest in real estate.

Real estate agents are licensed people who facilitate a home purchase, sale, or rent.

Purchase comps is the process of using recently sold comparable homes to determine a price for the home.

Off Market Listings are for-sale properties that aren't listed on MLS.

A multifamily property is any property with 2 or more units.

In real estate, a Joint Venture (JV) is when multiple parties combine to invest together.

Independent landlords (also: DIY landlords or private landlords) actively manage rentals themselves.

An iBuyer is a technology-enabled home buyer that makes an instant cash offer.

House hacking refers to renting portions of a purchased property out to tenants.

LPs are typically silent capital-providers for the real estate investment.

General Partner, or GP, are typically people in charge of the property investment in a joint venture.

For Sale By Owner, or FSBO, is when homes are sold by the homeowner rather than real estate agents.

Residential real estate is a property, with 1-4 units, used as a tenant's primary residence.

Commercial real estate is a property used for business purposes and often have 5 or more units.

Capital gains is the realized appreciation of an asset.

The BRRRR Method is an investing strategy popular for building passive income.

ADU is a detached secondary unit on a parcel zoned for single family homes.

Balance Sheet is a financial statement that details a business' Assets, Liabilities, and Equity.

Appreciation is when a property's value increases relative to its historical value.