Glossary

IRS §1031 lets you defer capital gains tax when selling investment real estate and reinvesting into a like-kind property.

The rate at which available inventory (units or SF) is leased or sold in a market.

Multifamily loans (5+ units) backed by Fannie Mae or Freddie Mac programs.

A detailed boundary and improvements survey meeting American Land Title Association standards.

The schedule that gradually pays down loan principal over time via level monthly payments.

A licensed opinion of a property's value based on comparable sales, income, and cost approaches.

The all-in yearly cost of a loan, including interest rate plus most fees.

The projected appraised value of a property after planned renovations are complete.

A mortgage the buyer can take over from the seller, keeping the original rate and terms.

A large lump-sum principal payment due at the end of a loan whose payments were amortized over a longer schedule.

One mortgage covering multiple properties held under one borrower.

A federal provision letting investors deduct a large percentage of qualifying property in the year placed in service.

Short-term financing (6–24 months) used to buy, stabilize, or reposition a property before permanent financing.

Buy, Rehab, Rent, Refinance, Repeat — a strategy to recycle capital by pulling equity out of stabilized rentals.

Financing used to buy an existing operating business — often SBA 7(a) or seller-financed.

Purchase rental property and hold long-term for cash flow, appreciation, and tax benefits.

NOI ÷ Purchase Price — the unleveraged annual yield of a commercial property.

Large periodic replacements — roofs, HVAC, water heaters, appliances — budgeted separately from routine maintenance.

Federal tax on the profit from selling an asset held for gain.

The money left after collecting rent and paying every expense including the mortgage.

Annual pre-tax cash flow divided by the total cash you invested to acquire the deal.

A refinance where the new loan is larger than the old one; you receive the difference as cash.

A municipal document confirming a building is legal to occupy — issued after final inspection on new construction or major renovation.

All the third-party and lender fees due at closing — typically 2–5% of purchase price.

The total of all liens against a property divided by the property's value.

Commercial loans pooled and sold as bonds — offering fixed-rate, non-recourse, long-term financing for stabilized commercial property.

Financing on income-producing property (5+ units or non-residential) — priced on NOI, LTV, and DSCR.

Recently sold, similar nearby properties used to estimate value.

A short-term loan that funds ground-up new construction in stages (draws) tied to inspection milestones.

A conforming loan that meets Fannie Mae / Freddie Mac guidelines and uses your personal income and DTI.

An engineering-based analysis that reclassifies parts of a building into shorter depreciation schedules (5, 7, 15 years).

A 300–850 score used to price consumer and investor loans; investor programs typically want 680+ for best pricing.

The non-cash annual expense that lets you deduct the wear-and-tear of a rental building against your rental income.

When you sell, the IRS 'recaptures' depreciation you claimed, taxing it at up to 25%.

The pre-agreed timeline of funding disbursements on a construction or rehab loan, tied to completed milestones.

The ratio of a property's net operating income to its debt payments — a 1.25 DSCR means the property earns 25% more than the mortgage.

Your total monthly debt payments divided by gross monthly income.

The buyer's investigation period after contract — inspections, financials, title, environmental, zoning.

A good-faith deposit sent to escrow when your offer is accepted — typically 1–3% of purchase.

Earnings Before Interest, Taxes, Depreciation, and Amortization — cash flow from operations.

Total dollars returned divided by dollars invested — a simple lifetime return metric.

A neutral third-party account holding funds and documents until all closing conditions are met.

A government-backed owner-occupied loan with 3.5% minimum down, flexible credit.

Buy distressed, renovate, sell within 6–12 months.

Purchase price ÷ annual gross rents — a quick napkin metric for comparing rentals.

Total rental income before any expenses or vacancy adjustments.

Short-term, asset-based loans from private lenders — priced on the deal, not the borrower.

The governing body of a condo/townhome/PUD community — collects dues and enforces CC&Rs.

Buying a small multifamily as your primary residence, living in one unit, and renting the others.

Warehouses, distribution centers, light manufacturing, flex space.

A loan where you pay only interest for an initial period, then start amortizing principal.

The annualized time-weighted return that makes the net present value of all a deal's cash flows equal zero.

A complete, pre-organized package of docs a lender needs to underwrite your loan without back-and-forth.

The default entity for holding rental property — liability protection with pass-through taxation.

The waterfall dividing profit between passive Limited Partners (LPs) and the active General Partner (GP/sponsor) in a syndication.

Loan amount divided by total project cost (purchase + rehab).

Loan amount divided by the property's appraised value, expressed as a percent.

The rent a property would command if leased today, established by an appraiser using recent local comparables.

A property combining residential and commercial uses — e.g. retail on the ground floor, apartments above.

The Census-defined labor and housing region around a major city.

Apartment property with 5 or more units — financed as **commercial** real estate.

Gross income minus operating expenses — excludes debt service, capex, and income taxes.

Investment property — the borrower does not live there.

A mortgage that doesn't meet the CFPB's Qualified Mortgage rules — used for bank-statement, DSCR, asset-depletion, and investor loans.

A loan whose only collateral is the property — the lender cannot come after your personal assets.

The interest rate written on your promissory note — what your monthly payment is calculated from.

Recurring costs of running a property — taxes, insurance, management, maintenance, utilities, vacancy allowance.

A property the borrower lives in as their primary residence.

Historical review of a commercial property for environmental contamination risk.

Principal + Interest + property Taxes + Insurance — the four components of a full monthly housing payment.

1 point = 1% of the loan amount, paid at closing.

An LP's first-dollar return threshold — usually 6–9% annually — that must be paid before the GP earns any profit split.

A fee charged if you pay off a loan early — usually within the first 3–5 years.

A bank or investment statement showing you have the cash needed to close.

Physical walk-through by a licensed inspector who reports on the condition of major systems.

A neutral third party that holds 1031 exchange proceeds — required by the IRS.

A loan where the lender can pursue the borrower personally beyond the collateral if you default.

Paying off an existing loan with a new one — usually to lower the rate, extract equity, or extend the term.

A snapshot of every unit's current tenant, lease dates, rent, deposits, and status.

Liquid post-close funds a lender requires you to keep in the bank, measured in months of PITI.

A tax election that can reduce self-employment tax on active real estate income (flipping, agent commissions).

Small Business Administration loans used to finance business acquisitions, owner-occupied commercial real estate, and equipment.

Small-business cash flow to the owner — EBITDA plus owner comp and personal add-backs.

The minimum length of ownership before a lender will refinance based on new appraised value instead of purchase price.

Facility renting individual storage units on month-to-month leases.

The seller becomes the lender, carrying part or all of the purchase price as a note.

A parent LLC that spawns internal 'series' — each with its own liability shield — for holding multiple properties without filing separate LLCs.

A detached 1-unit home held as a rental — the most common investment property type.

Duplex, triplex, or fourplex — still **residential** for financing purposes.

A property rented nightly or weekly on Airbnb/Vrbo — treated differently by lenders and the IRS.

A distinct geographic pocket within a larger MSA — often defined by school district, ZIP, or highway boundaries.

A group investment where a sponsor raises capital from passive Limited Partners to acquire and operate real estate.

The property's actual income and expenses over the last 12 months — the primary underwriting document for commercial multifamily.

A non-binding proposal outlining a lender's or buyer's key terms before formal underwriting/contract.

One-time insurance policy protecting against defects in a property's title (liens, forgery, ownership disputes).

A single report combining Equifax, Experian, and TransUnion — the lender uses the middle score of the three.

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

The percentage of time a rental is expected to sit empty between tenants.

Contract a property below market and assign the contract to an end-buyer for a fee.