Real Estate Investing Glossary

The rate at which available homes sell in a given market during a time period.

The estimated market value of a property after all renovations are completed.

The process of paying off a loan through regular scheduled payments of principal and interest.

A licensed professional's independent estimate of a property's market value.

The increase in a property's value over time, either through market forces or investor-driven improvements.

A home loan that can be transferred from the seller to the buyer, keeping the original terms.

A large lump-sum payment due at the end of a loan term that pays off the remaining balance.

Short-term financing that bridges the gap between purchasing a property and securing permanent financing.

Buy, Rehab, Rent, Refinance, Repeat — a strategy to recycle capital into multiple rental properties.

An investment strategy of purchasing property and holding it long-term for rental income and appreciation.

Capitalization rate — the ratio of a property's net operating income to its market value.

The money left over each month after all property-related income and expenses are accounted for.

Annual pre-tax cash flow divided by total cash invested, expressed as a percentage.

Fees and expenses paid at settlement when a real estate transaction is finalized.

Recent sales of similar properties used to estimate the market value of a subject property.

Transferring the right to purchase a property from a buyer (assignor) to a third party (assignee) for a fee.

The number of days a property has been listed for sale before going under contract.

The total cash required to cover loan payments — both principal and interest — over a given period.

A legal document that transfers ownership of real property from one party to another.

Two simultaneous closings on the same property — an investor buys from the seller then immediately sells to the end buyer.

A property's net operating income divided by its annual debt service — measures ability to cover loan payments.

The investigation and verification process buyers conduct before committing to a real estate purchase.

A deposit paid by the buyer to demonstrate serious intent — held in escrow until closing.

The difference between a property's market value and the outstanding balance of all loans against it.

A neutral third-party account that holds funds and documents during a real estate transaction.

The plan for how and when an investor will eventually sell or dispose of an investment property.

Buying a distressed property, renovating it, then selling it quickly for a profit.

The legal process by which a lender repossesses a property when the borrower defaults on the loan.

Private capital used to cover the difference between a primary loan and the total funds needed for a deal.

A quick valuation metric: purchase price divided by gross annual rents.

Short-term, asset-based loans from private lenders — used for acquisitions and rehabs when speed matters.

The annualized rate of return on an investment accounting for the timing and magnitude of all cash flows.

A business arrangement where two or more parties pool resources to complete a real estate deal.

Using borrowed capital (debt) to increase the potential return on an investment.

A legal claim against a property that secures payment of a debt or obligation.

The ratio of a loan's balance to the property's appraised value, expressed as a percentage.

The price a property would sell for in a competitive market between a willing buyer and seller.

The highest price an investor can pay for a property and still achieve their target profit.

A loan used to purchase real property, secured by the property itself as collateral.

A residential building containing two or more housing units — from duplexes to large apartment complexes.

A property's total income minus all operating expenses, before mortgage payments and taxes.

A written promise to repay a loan — the legal document that evidences the debt in real estate financing.

A property for sale that is not publicly listed on the MLS or major listing websites.

A transaction where the seller acts as the lender — providing financing directly to the buyer.

Principal, Interest, Taxes, and Insurance — the four components of a monthly mortgage payment.

Upfront fees paid to a lender, equal to 1% of the loan amount per point.

Loans from individual private investors — usually friends, family, or high-net-worth individuals — secured by real property.

A financial projection document showing expected income, expenses, and returns for an investment property.

The legal contract between buyer and seller that outlines the terms of a real estate transaction.

The total estimated cost to renovate a property, including materials, labor, permits, and contingencies.

Replacing an existing loan with a new loan — often to access equity, lower the rate, or change loan terms.

Real Estate Owned — a bank-owned property acquired through foreclosure when it didn't sell at auction.

The minimum amount of time a property must be owned or a loan must exist before a lender will refinance or lend against it.

A transaction where the seller extends credit to the buyer, eliminating the need for a traditional bank loan.

A sale where the lender agrees to accept less than the full balance owed on the mortgage.

Buying a property 'subject to' the existing mortgage — the deed transfers but the loan stays in the seller's name.

A deed issued to the winning bidder at a tax deed sale — transferring ownership of a property seized for unpaid taxes.

A government claim against a property for unpaid property taxes — investors can purchase these liens and earn interest.

Legal ownership rights to a property — the bundle of rights that come with owning real estate.

A lease where the tenant pays property taxes, insurance, and maintenance costs in addition to rent.

A fully renovated, tenant-occupied rental property sold to investors with property management in place.

The process of evaluating the financial risk of a real estate loan or investment.

The percentage of available rental units or space that is unoccupied at a given time.

A property investment strategy that generates returns by improving the property to increase its income and value.

Finding distressed properties, getting them under contract, then selling that contract to another investor for a fee.

A junior mortgage that includes and 'wraps around' an existing first mortgage on the property.

Government regulations that specify how land and buildings in specific geographic areas can be used.