Property Investing Glossary

The complete library of all the terms landlords should know.

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Banking
Financials
Operations
Insurance
Loans
Investing

Terms

Loans

Servicing

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

Underwriter

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

Title insurance

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

Seller financing

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

Mortgage Loan Originator (MLO)

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

Jumbo loan

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

Home Equity Line of Credit (HELOC)

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

Fixed Rate Mortgage

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

Home equity

Home equity is the amount of the home value owned.
Loans

Rental income advance

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

Discount rate

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

Default

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

Conforming loan

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

Closing costs

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

Cash Out Refinance

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

Annual Percentage Rate (APR)

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

Amortization

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

Unsecured loan

Unsecured loans are provided to borrowers without underlying collateral.
Loans

Secured loan

Secured loans require borrowers to put up collateral.
Loans

Adjustable Rate Mortgage (ARM)

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

Principal, Interest, Taxes, Insurance (PITI)

PITI are the different pieces of a mortgage payment.
Loans

Mortgage

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

Down payment

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

NMLS

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

Hard money

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

Mortgage Interest deduction

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

Depreciation

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

Rent collection

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

Homeowner Association (HOA)

Homeowner Associations plan for and enforce rules for a community.
Operations

Fair Housing Act

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

Eviction

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

Quitclaim deed

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

Warranty deed

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

Deed

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

Permit

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

Sublease

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

Property title

Property title is the legal ownership of the property.
Operations

Zoning codes

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

Cash for Keys

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

Screening

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

Squatter

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

Unlevered yield

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

Month-to-month (M2M)

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

Security deposit

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

Rental income

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

Limited Liability Company (LLC)

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

Lease

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

Capital expenditures (CapEx)

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

Real estate broker

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

Bookkeeping

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

Amenity

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

Property developer

Property developers renovate and build properties for a higher value.
Operations

Vacancy rate

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

MLS

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

Property Manager

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

Debt Service Coverage Ratio (DSCR)

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

Internal Rate of Return (IRR)

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

Expense ratio

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

Bonus depreciation

Bonus depreciation allows property investors to immediately depreciate eligible assets.
Financials

Statement of Cash Flows (CF)

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

Income Statement (IS)

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

Rental comps

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

Pro forma

Pro Formas are financial projections for a selected investment.
Financials

Net operating income (NOI)

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

Cap rate

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

Cash on Cash (CoC) return

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

Return on investment (ROI)

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

After Repair Value (ARV)

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

Free cash flow (FCF)

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

Operating Cash Flow (CF)

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

50% Rule

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

Gross Rent Multiplier (GRM)

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

1% Rule

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

Debt to Income (DTI)

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

Loan to Value (LTV)

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

Wire transfers

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

Virtual cards

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

Physical cards

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

Neobank

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

FDIC

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

Bank Holiday

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

ACH

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

Tenant Security Account

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

Umbrella insurance

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

Renter's insurance

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

Private Mortgage Insurance (PMI)

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

Landlord's insurance

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

Homeowners insurance

Homeowners insurance protects individuals of losses to the covered property.
Investing

House flipping

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

Appraiser

Appraisers assess the fair market value of a property.
Investing

Arms length transaction

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

Non-Arms length transaction

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

Earnest money

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

1031 Exchange

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

FIRE

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

Wholesaler

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

Turnkey

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

Syndicate

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

Single Family Rental (SFR)

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

Schedule E

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

Real Estate Investment Trust (REIT)

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

Real estate agent

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

Purchase comps

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

Off Market Listings

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

Multifamily

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

Joint Venture (JV)

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

Independent landlord

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

iBuyer

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

House hacking

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

Limited Partner (LP)

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

General Partner (GP)

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

For Sale by Owner (FSBO)

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

Residential real estate

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

Commercial real estate

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

Capital gains

Capital gains is the realized appreciation of an asset.
Investing

BRRRR

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

Accessory Dwelling Unit (ADU)

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

Balance Sheet (BS)

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

Appreciation

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

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