R.E.I. Capital Funding

         



      Glossary of Real Estate Terms



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1031 Exchange

A 1031 exchange is a powerful tax-deferment strategy for real estate held as an investment. It allows an investor to sell a property without paying capital gains on the sale.

A

Adverse Possession

Adverse possession, or “squatter’s rights,” is a legal ruling that transfers property ownership based on continuous occupancy over an extended period of time.

After-Repair Value (ARV)

After-repair value, or ARV, is the potential sales price of a home or investment property as determined by the market. 

Amenity

An amenity is a desirable or useful feature or facility within a property structure. Amenities are typically features that are highlighted and pitched to renters when they are looking to rent at a certain complex.

Amortization

Amortization is the gradual process of an outstanding loan balance dropping over time as the borrower makes monthly payments.

Appraiser

An appraiser is a trained, licensed professional tasked with evaluating a property to estimate its current fair value in the marketplace.

Appreciation

Appreciation is the rise in value of an asset over time, typically relating to the value of an entire asset class, such as real estate, stocks, bonds, and currencies.

APR

The Annual Percentage Rate, or APR, is the yearly amount that must be paid by a borrower in order to maintain and to pay off a loan.

B

Broker

A broker is a real estate professional, who connects a buyer and a seller. In real estate, a broker’s job is to match homebuyers and home sellers, while being paid a commission.

C

Capital Expenditure

Capital expenditures (CapEx) are investments in long-term, fixed assets—like a new roof or company equipment. 

Capital Gains Tax

When you sell an asset for more than you paid for it, you trigger what is called a capital gains tax—but there are ways to avoid paying this pricey tax.

Capitalization Rate aka “Cap Rate”

The capitalization rate is the rate of return an investor can expect from their real estate properties, calculated by dividing the income by the market value.

Cash-Out Refinance

A cash-out refinance allows homeowners to take out a new mortgage and receive additional cash, which can be used for renovations or debt pay-off.

Closing Costs

Closing costs are payments by both buyers and sellers that occur during a real estate transaction, such as the sale or purchase of a house.

Comparative Market Analysis (CMA)

A comparative market analysis (CMA) looks at similar properties to help a real estate investor, seller, or buyer determine a home sale or offer price.

Consumer Price Index

The Consumer Price Index is a vital economic indicator that measures how much the cost of consumer goods and services increase over a year.

D

Debt-to-Income Ratio (DTI)

The debt-to-income ratio calculates the ratio of monthly debt to gross income. Lenders use this number to understand how much house a buyer can afford.

Deed

A deed is the document showing proof of ownership for land or property. 

Default

Default is the failure to repay a debt, such as a mortgage. This can lead to eviction and foreclosure and can dramatically affect a borrower’s credit.

Depreciation

Depreciation is how goods and assets lose value. But that’s not a bad thing—for savvy investors, it’s a tax strategy. 

Downturn

An economic downturn happens when a country’s gross domestic product turns stagnant or starts to fall due to decreased consumer confidence. It can lead to a recession.

Dual Agency

Dual agency is when a real estate agent represents both the buyers and the sellers in a transaction. 

E

Earnest Money

When purchasing real estate, earnest money—or a good faith deposit—shows sellers you're serious. 

Egress

Egress is another word for "a way to get out." When buying real estate or expanding a basement, you'll want to follow local code. 

Eminent Domain

The Fifth Amendment grants the federal government the power of eminent domain, which allows it to take private property and convert it to public use.

Equity

Equity is the difference between the market value of a property and the amount of money that is still owed on the loan. A broad term, equity, at its essence, is about ownership.

Estate

A word with deep legal origins, “estate” has been consistently defined for centuries while adapting to the needs of the times. In essence, one’s estate is everything they own; it’s everything that belongs to a person.

Eviction

An economic downturn happens when a country’s gross domestic product turns stagnant or starts to fall due to decreased consumer confidence. It can lead to a recession.

F

Fair Housing Act

The Fair Housing Act prevents housing discrimination based on race, sex, religion, disability, and a number of other factors and identities. 

Fair Market Value (FMV)

Fair market value determines an asset’s value—like the appropriate purchase price for a house. 

FHA Loan

FHA loans are mortgages insured by the Federal Housing Administration (FHA), meant to boost home ownership among low-to-moderate income individuals.

Fixed Rate Mortgage

A fixed-rate mortgage charges a set interest rate that doesn't change during the term of the loan.

For Sale By Owner (FSBO)

For sale by owner (FSBO) is a real estate transaction where a property owner chooses not to hire a real estate agent and instead sells the property themselves.

Foreclosure

Foreclosure is a legal process whereby a lender takes ownership of a property from the borrower after the borrower fails to honor their commitment to pay off their loan.

Fractional Ownership

Fractional ownership is when two or more investors purchase a property together. 

Freddie Mac

Freddie Mac, like Fannie Mae, is a home mortgage company created by the U.S. Congress. It buys and guarantees mortgages through the secondary mortgage market.

G

Gentrification

Gentrification is a process where a neighborhood undergoes urban development, involving an influx of higher-income residents to an otherwise abandoned or rundown area.

Ground Lease

A ground lease gives tenants permission to develop a plot of land over the course of the lease.

H

HELOC

A home equity line of credit (HELOC) is a home loan that uses the equity in your home as collateral. 

Home Inspection

A home inspection is an examination of a home—from the foundation to the roof.

Home Warranty

A home warranty covers the repair and replacement of appliances and home systems, such as water heaters, plumbing, and HVAC.

Housing Starts

Housing starts is the number of new residential construction projects that begin in a calendar month. 

I

Inflation

Inflation is the steady increase in the average prices of goods and services over time. Inflation reduces a currency’s purchasing power.

Ingress

Ingress provides legal access for a landlocked real estate owner through a private road or driveway. 

Interest

Interest rates determine how much it costs to borrow money, like when buying a house, or how much return you’ll receive on an investment.

Intestate

When someone dies intestate, it means that they passed without leaving a valid will. As a result, their estate goes into a process called intestate succession.

J

Joint Tenancy

Joint tenancy is one type of property ownership, which gives two parties equal rights. 

L

Lease

A lease is a legal agreement between a landlord and a renter allowing the renter to use a property for a specific period of time in exchange for rent payments.

Leverage

Real estate leverage is when you use debt to buy investment properties, expand your potential return on investment and increase your net worth.

Lien

A lien is a financial claim on a property that gives creditors legal rights — such as allowing a bank to foreclose on or sell a house.

M

Mortgage

A mortgage is a loan used to buy a house or other real estate. In other words, it’s a term for “home loan.”

Mortgage Broker

A mortgage broker serves as a real estate loan professional between real estate buyers and lenders. They can shop different lenders to find borrowers the best rate and loan terms.

Multiple Listing Service (MLS)

The multiple listing service (MLS) provides information about homes listed for sale. Realtors use the MLS to help buyers and sellers. 

N

Net Worth

Net worth, also known as personal capital, is like your personal balance sheet. It’s all the assets you own less the debts you owe—acting as a snapshot of your personal wealth.

Note

A note creates a financial obligation between a creditor and an investor, typically in the form of a loan. 

O

Offer

An offer is a proposal to buy or sell property for a set price, most commonly used during the home-buying process. 

P

PITI

PITI refers to essential elements of your mortgage payment: principal, interest, taxes, and insurance. 

Pre-Approval Letter

A pre-approval letter includes documentation stating exactly how much mortgage a homebuyer has been conditionally approved to borrow. 

Private Mortgage Insurance

Private mortgage insurance (PMI) is a type of mortgage insurance that is required if you purchase a property with less than 20% down.

Probate

Probate is a court procedure that administers a deceased person’s will. Real estate investors can search probate property to find below-market deals.

Property Manager

Property managers are individuals or companies that are hired to manage a rental property. They handle day-to-day operations, find tenants and collect rent.

Q

Quitclaim Deed

A quitclaim deed is a quick way to transfer property to a new owner. 

R

Real Estate

Real estate encompasses land and property, plus any associated structures or resources, which investors can buy, sell, and rent to increase their income.

Real Estate Agent

A real estate agent arranges real estate transactions by connecting people selling real estate with people interested in buying real estate.

Recession

A recession is a period of decreasing economic activity that can negatively affect the financial markets.

Refinance Rate

The refinance rate is the APR for a mortgage refinance, such as a cash-out refinance. You can save money if it’s better than your current rate.

Rent To Own Homes (RTO)

Rent-to-own homes allow renters to buy the property they live in at a later date. Before the purchase, they make regular payments and manage home maintenance.

Return On Investment (ROI)

Return on investment, or ROI, measures how much net profit is made on an investment, displayed as a percentage of the cost of that investment.

S

Security Deposit

Landlords require a security deposit before move-in to act as a guarantee against property damages—but most security deposits are refundable.

Short Sale

A short sale is the sale of a property currently underwater on its mortgage, and typically is initiated as an alternative to foreclosure. 

Squatter

A squatter occupies real estate without having a proper legal claim. Most of the time, squatters can’t be removed—they must instead be evicted. 

Sublease

A sublease is when a tenant rents a property to another tenant. In most cities, real estate investors can decide whether they want to permit subletting.

Syndicate

Syndicates are partnerships between people or companies to handle large transactions — like real estate purchases. 

T

Tax Lien

A tax lien is a legal claim against the property of an individual or business that fails to pay taxes owed to the government.

Tenants By Entirety

Much like in a joint tenancy, spouses who own property as tenants by the entirety each own an undivided interest in the property, each has full rights to occupy and use it and has a right of survivorship.

Timeshare

A timeshare is an agreement in which many individuals share the costs of a property.

Title

A title defines who owns a real estate property. 

Title Insurance

Title insurance protects either a lender or a homebuyer from claims against a home’s title, such as liens or encumbrances. 

U

Under Contract

If a home is listed as "under contract," that means the owners have accepted an offer. 

Underwriter

A mortgage underwriter decides whether your mortgage loan application gets approved, suspended or denied. 

Unsecured Loan

An unsecured loan is a loan that does not require collateral, such as real estate. 

W

Warranty Deed

A warranty deed guarantees the personal ownership of property, and is an essential protection against foreclosure.