F A Q

COUNTEROFFER The response from the seller in regard to an offer. 
DEBT TO INCOME RATIO A lender will evaluate whether a borrower’s income is large enough to handle their payments on existing debts plus their new mortgage payments
DOWN PAYMENT EARNEST MONEY ESCROW EQUITY
A percent of the cost of the property that is paid up front as a part of the mortgage. The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party. Upon closing, the money will generally be applied to the down payment or closing costs. This term has multiple meanings; earnest money is typical held by a third party until closing in “escrow.” It con also be referred to as the time period from when the contract is written and accepted by the seller to when the home sale actually closes. The difference in the market value of a home versus what is owed on the home.
 FHA FIXED RATE HOME EQUITY LINE OF CREDIT HOME INSPECTION HOME PROTECTION PLAN HYBRID MORTGAGE INSURANCE MORTGAGE NOTE MULTIPLE LISTING SERVICE (MLS) PRE-APPROVAL. A mortgage that is financed through a private lender and insured by the Federal Housing Administration, often requiring a lower down payment and income to qualify. The interest rate will remain the same for the entire life of the mortgage. A loan or line of credit that your lender may offer using the equity in your home as collateral. The process in which a professional inspects the seller’s home for issues that may not be readily apparent, and then creoles a report for the buyer to review. A one-year service that covers the cost of repairs or replacements to items covered in the plan (such as stoves, dishwashers, A/C, heaters, etc.). A loan that starts with a fixed role period, then converts to an adjustable rate. Insurance written in connection with a mortgage loon that protects the lender in the event the borrower cannot repay their loan. This is usually not required if the borrower hos 20% or more for the down payment. A promise lo pay a sum of money at a standard interest role during a specific term that is secured by a mortgage. The national list of real estate properties that ore available for sole. These are the most reliable sources to receive up-to-date listing information. The process in which a lender makes an initial evaluation of how much money a buyer might be qualified to borrow based on the preliminary financial information provided. This gives the seller more confidence in the buyer’s ability to close escrow, but is not a guarantee that the loon will be approved.


A Glossary of Read Estate Investing Terms
NOTE: This is an ever-growing list. Is there an important real estate term that should be added? Let us know!

Appraisal: An appraisal is an evaluation by a trained professional appraiser to determine how much a property is worth. Banks order an appraisal when they are giving you a mortgage to make sure the house you are buying is actually worth the sale price.

Appreciation: When the value of a property goes up. This usually happens naturally over time. It can also happen when a house is renovated, or when an additional bedroom or bathroom is added to an existing house; this is called forced appreciation, because you are forcing the value to appreciate through the rehab or reno work.

Asset: The simplest definition of an asset (thanks to the Rich Dad, Poor Dad book) is anything that puts money into your pocket. An asset is anything that MAKES you money.
Bigger Pockets: Arguably the world’s biggest resource and community dedicated to real estate investing. They publish online content, books, podcasts, online forums and more.

BRRRR: A real estate investing strategy acronym that stands for Buy, Rehab, Rent, Refinance, Repeat. Using this strategy, an investor buys a below-market-value (aka cheap) property with private money, cash, a short term loan etc. Usually, in order to get a property that is below market value, it will require rehab (aka renovation) work to increase it’s value. After the property is rehabbed, it is rented out to tenants. The next step is to refinance the property with a mortgage that lets you take out part of the new value of the home. This is how you get most (or all) of your money back out to be able to do the last “R” step: Repeat.
This is THE book on the BRRRR real estate investing strategy, published by Bigger Pockets. It also covers a lot of the basics of real estate investing as it walks you through the BRRRR strategy, so it’s a fantastic book to read as you begin in real estate.
Buy and Hold: When you buy a property and hold (keep) it, usually using it as a rental property. The alternative to buy and hold is usually fix and flip.

Cash-Out Refinance: The process of refinancing a property, taking out a new mortgage on the newly appraised value, and being able to take a portion of the cash out to invest in something new.

Closing: The finally step in the home buying or selling process; a meeting with the title company to sign papers and complete the real estate transaction.

Conventional Loan: The most common type of mortgage offered by banks. Usually requiring 20% down (possibly 25% or 30%, depending on the type of investment property and the bank’s rules). These loans are taken out with a bank near you, and then sold to bigger, national financial institutions, but your mortgage terms remain the same. There are limits on how many conventional loans people can take out, so after you invest in your first few investment properties, you’ll likely have to move on to another type of financing.

Deal: The term “deal” is used by real estate investors to talk about a real estate transaction. “I did my first deal last year.” Or “I refinanced, pulled the cash out, and then used that to buy an other deal.”
Driving for Dollars: The process of driving around, looking at real estate. Looking for For Sale By Owner signs, or For Rent signs, looking at foreclosures and houses going to auctions. Analyzing neighborhoods and looking for potential opportunities.
Fannie Mae and Freddie Mac: Federally backed home mortgage companies. These set the national rules and used by banks when they give out conventional mortgages.
Fix and Flip: The process of buying a fixer upper property in need of rehab and renovation. You fix it up after you buy it, and then you sell it to make a profit. A short term process, as opposed to the long term process of buying a property and holding it as a rental property.
Foreclosure: Describing the process when someone stops paying their mortgage. Usually due to personal or financial hardships such as job loss, divorce, death etc. Eventually, the house goes into foreclosure and will go back to the bank who provided the mortgage for the house.
Hard Money: A loan you take out from a third party lending company (not a bank) that usually has higher interest rates, but the benefit is there are less hoops for you to jump through. Hard money is most often used to buy a house you plan to flip, or to buy a house you plan to BRRRR which you’d then take a more “normal” mortgage out on it during the refinance stage.
In House (Portfolio) Loan: As opposed to a conventional loan where banks follow strict lending rules and offer the lowest interest rates, an in-house or portfolio loan is done by the bank itself. It is not sold to a larger loan company after closing; it stays with the bank. The downside is the interest rate is usually higher, but the benefit is often more flexible lending terms.
Landlord: A landlord is someone who owns and manages a rental property. However, in cases where an investor uses a property manager to manage their rental property, the property manager is acting as the landlord of the property, even though they don’t own it.
Liability: As per the Rich Dad, Poor Dad definition, a liability is anything that TAKES money OUT of your pocket.
Market Value: The value of a property, determined by what it can sell for in current market conditions. Determined by a professional appraiser.
MLS: Stands for Multiple Listing Service, and is a database of home listings that real estate brokers and agents gain access to. It shows listings from agents across all different companies, in hopes of connecting home buyers to a property that’s for sale.
Multi-Family Property: A property consisting of multiple units, like a duplex (2) or triplex (3).

Private Lender: A person, organization, or company that loans money to someone (with interest) but isn’t tied to any bank.
Property Manager: Someone who is hired to manage a rental property, for a monthly fee. Property management services handle everything from screening tenants, collecting rents, maintenance, city permitting and more.
Real Estate: Property consisting of land and buildings.
Real Estate Agent: A real estate agent represents someone who is looking to buy or sell property or land.
Realtor: The title given to a real estate agent who is part of the National Association of Realtors, the largest trade organization in the United States.
Single Family Home: A house suitable for one family.
Syndication: When multiple investors come together and pool their money, with the hopes of buying a bigger investment like an apartment complex.
Tenant: Another name for renters; the people who rent a property.
Vacation Rental Property: A property that is listed for short term rent on vacation rental sites like VRBO and AirBnb.
Zillow: An online website and app that provides users with home listings, city and neighborhood information, estimated home values, property history, real estate agent details and more. Another similar app is Redfin.
– – –
When I read my very first real estate business book, I didn’t know what most of these terms meant.
It felt a little bit like reading a foreign language.
But it didn’t take long before the real estate investing terminology started to become familiar, and they’ve shown up again in every real estate book I’ve read since.
Slowly, they became second nature and soon, you don’t have to think so hard to remember what they mean.
The trick is to stick with it. 
Everything is unfamiliar and awkward when you first start.
Soon, you’ll be using terms like asset and BRRRR in sentences and wonder “Who am I and where did I come from?!”





Real estate terminology encompasses a wide range of terms used in the buying, selling, and management of property. Some common terms include:


1. Appraisal: The estimated value of a property determined by a qualified professional.
2. Closing: The final step in a real estate transaction where ownership of the property is transferred from the seller to the buyer.
3. Escrow: A third party holds funds or documents during a real estate transaction until all conditions are met.
4. Listing: A property for sale represented by a real estate agent or broker.
5. Mortgage: A loan used to purchase real estate, with the property serving as collateral.
6. Title: Legal ownership of a property.
7. Foreclosure: The legal process by which a lender takes possession of a property due to the borrower’s failure to make mortgage payments.
8. HOA (Homeowners Association): A governing body in a residential community that sets and enforces rules and collects fees from homeowners.
9. Down Payment: A portion of the purchase price paid upfront by the buyer when securing a mortgage.
10. ROI (Return on Investment): The profitability of a real estate investment, typically expressed as a percentage.
11. Capital Gains: Profits from the sale of a property or investment.
12. Landlord: The owner of a rental property who leases it to tenants.
13. Tenant: A person who rents or leases a property from a landlord.
14. Zoning: Government regulations that control land use and development in specific areas.
15. MLS (Multiple Listing Service): A database used by real estate agents to share information about properties for sale.
16. CMA (Comparative Market Analysis): A report prepared by a real estate agent that compares similar properties to determine a fair market value.
17. Easement: The legal right to use someone else’s land for a specific purpose.
18. Amortization: The process of paying off a mortgage through regular payments over time.
19. Contingency: A condition that must be met before a real estate contract becomes binding.
20. Assessment: The value placed on a property by a taxing authority for the purpose of calculating property taxes.


Of course! Here are some additional real estate terminology:


21. Deed: A legal document that transfers ownership of a property from one party to another.
22. Eminent Domain: The government’s power to take private property for public use, with compensation to the owner.
23. Fixture: An item that is permanently attached to a property and is included in the sale.
24. Encumbrance: Any claim or lien on a property that may affect its value or transfer of ownership.
25. Lien: A legal claim against a property to secure the payment of a debt.
26. Covenants, Conditions, and Restrictions (CC&R): Rules and regulations that govern the use and maintenance of properties within a subdivision or community.
27. Earnest Money: A deposit made by the buyer to show their commitment to the purchase of a property.
28. Escrow Account: An account held by a third party where funds are held until all conditions of a real estate transaction are met.
29. Fair Market Value: The price that a willing buyer and a willing seller would agree upon in an open and competitive market.
30. Lease: A contract between a landlord and a tenant that outlines the terms and conditions of renting a property.
31. Right of Way: The legal right to pass through someone else’s property, typically for access purposes.
32. Short Sale: A sale of a property for less than the amount owed on the mortgage, with the lender’s approval.
33. Survey: A professional measurement and mapping of a property’s boundaries, structures, and features.
34. Title Insurance: Insurance that protects against financial loss due to defects in the title of a property.
35. Walkthrough: A final inspection of a property before closing to ensure that any agreed-upon repairs have been completed and the property is in the expected condition.
36. Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that may change periodically based on market conditions.
37. Broker: A licensed real estate professional who acts as an intermediary between buyers and sellers in real estate transactions.
38. Comparables: Similar properties used to determine the value of a subject property through a comparative market analysis.
39. Depreciation: A decrease in the value of a property over time, typically due to wear and tear or changes in market conditions.
40. Title Search: An examination of public records to verify the legal ownership of a property and uncover any liens or encumbrances.


These are just a few examples, and there are many more terms used in real estate transactions and management.


There are several types of building constructions, including:


1. Residential: Homes, apartments, condominiums, and other living spaces.
2. Commercial: Office buildings, retail stores, malls, and restaurants.
3. Industrial: Factories, warehouses, and manufacturing facilities.
4. Institutional: Schools, hospitals, government buildings, and religious institutions.
5. Infrastructure: Bridges, tunnels, dams, roads, and railways.
6. Recreational: Stadiums, arenas, amusement parks, and recreational facilities.
7. Specialized: Buildings designed for specific purposes such as airports, prisons, and data centers.


Real estate ratios are financial metrics used to evaluate the performance, efficiency, and financial health of real estate investments. Some common real estate ratios include:


1. Cap Rate (Capitalization Rate): Measures the rate of return on a real estate investment property based on the expected income it will generate. It’s calculated by dividing the property’s net operating income (NOI) by its current market value or purchase price.
2. Debt Service Coverage Ratio (DSCR): Evaluates a property’s ability to cover its debt obligations. It’s calculated by dividing the property’s net operating income (NOI) by its annual debt service (mortgage payments).
3. Gross Rent Multiplier (GRM): Helps to quickly assess the value of a rental property. It’s calculated by dividing the property’s purchase price by its gross rental income.
4. Loan-to-Value Ratio (LTV): Indicates the proportion of a property’s value that is financed by debt. It’s calculated by dividing the mortgage amount by the appraised value or purchase price of the property.
5. Return on Investment (ROI): Measures the profitability of an investment. It’s calculated by dividing the net profit from the investment by the initial cost or investment.
6. Operating Expense Ratio (OER): Measures the efficiency of a property’s operations by comparing its operating expenses to its gross operating income. It’s calculated by dividing operating expenses by gross operating income.


These ratios help investors and analysts make informed decisions about real estate investments, assess risk, and compare different investment opportunities.


Sure, here are a few more real estate ratios:


7. Cash-on-Cash Return (CoC): Measures the annual return on invested cash. It’s calculated by dividing the annual pre-tax cash flow by the total cash invested.
8. Equity Dividend Rate (EDR): Measures the return on equity invested in a property. It’s calculated by dividing the cash flow available to equity investors by the equity investment.
9. Vacancy Rate: Indicates the percentage of units or space within a rental property that are unoccupied. It’s calculated by dividing the number of vacant units by the total number of units or space.
10. Price-to-Rent Ratio: Helps to assess whether it’s more financially advantageous to buy or rent a property in a particular market. It’s calculated by dividing the property’s purchase price by its annual rental income.
11. Tenant Turnover Rate: Measures the frequency at which tenants leave a rental property. It’s calculated by dividing the number of tenant move-outs within a given period by the total number of occupied units.


These ratios provide valuable insights into various aspects of real estate investment, including cash flow, profitability, market dynamics, and operational efficiency.


Certainly! Here are a few additional real estate ratios:


12. Price-to-Income Ratio: Compares the median property price to the median household income in a specific area, providing insight into affordability for potential buyers.
13. Operating Margin: Measures the percentage of revenue that remains after deducting operating expenses. It’s calculated by dividing the property’s net operating income (NOI) by its total revenue.
14. Debt Yield: Evaluates the property’s ability to service its debt by comparing its net operating income (NOI) to its total loan amount. It’s calculated by dividing the property’s NOI by its total debt.
15. Break-even Ratio: Indicates the level of income needed to cover operating expenses and debt service. It’s calculated by dividing the sum of operating expenses and debt service by the property’s gross potential income.
16. Rent Growth Rate: Measures the rate at which rental prices are increasing over a specific period in a particular market, indicating trends in rental demand and market dynamics.


These ratios offer further insights into the financial performance, risk assessment, and market dynamics of real estate investments, helping investors make informed decisions and manage their portfolios effectively.


Real estate ratios are financial metrics used to evaluate the performance, efficiency, and financial health of real estate investments. Some common real estate ratios include:


1. Cap Rate (Capitalization Rate): Measures the rate of return on a real estate investment property based on the expected income it will generate. It’s calculated by dividing the property’s net operating income (NOI) by its current market value or purchase price.
2. Debt Service Coverage Ratio (DSCR): Evaluates a property’s ability to cover its debt obligations. It’s calculated by dividing the property’s net operating income (NOI) by its annual debt service (mortgage payments).
3. Gross Rent Multiplier (GRM): Helps to quickly assess the value of a rental property. It’s calculated by dividing the property’s purchase price by its gross rental income.
4. Loan-to-Value Ratio (LTV): Indicates the proportion of a property’s value that is financed by debt. It’s calculated by dividing the mortgage amount by the appraised value or purchase price of the property.
5. Return on Investment (ROI): Measures the profitability of an investment. It’s calculated by dividing the net profit from the investment by the initial cost or investment.
6. Operating Expense Ratio (OER): Measures the efficiency of a property’s operations by comparing its operating expenses to its gross operating income. It’s calculated by dividing operating expenses by gross operating income.


These ratios help investors and analysts make informed decisions about real estate investments, assess risk, and compare different investment opportunities.


Sure, here are a few more real estate ratios:


7. Cash-on-Cash Return (CoC): Measures the annual return on invested cash. It’s calculated by dividing the annual pre-tax cash flow by the total cash invested.
8. Equity Dividend Rate (EDR): Measures the return on equity invested in a property. It’s calculated by dividing the cash flow available to equity investors by the equity investment.
9. Vacancy Rate: Indicates the percentage of units or space within a rental property that are unoccupied. It’s calculated by dividing the number of vacant units by the total number of units or space.
10. Price-to-Rent Ratio: Helps to assess whether it’s more financially advantageous to buy or rent a property in a particular market. It’s calculated by dividing the property’s purchase price by its annual rental income.
11. Tenant Turnover Rate: Measures the frequency at which tenants leave a rental property. It’s calculated by dividing the number of tenant move-outs within a given period by the total number of occupied units.


These ratios provide valuable insights into various aspects of real estate investment, including cash flow, profitability, market dynamics, and operational efficiency.


Certainly! Here are a few additional real estate ratios:


12. Price-to-Income Ratio: Compares the median property price to the median household income in a specific area, providing insight into affordability for potential buyers.
13. Operating Margin: Measures the percentage of revenue that remains after deducting operating expenses. It’s calculated by dividing the property’s net operating income (NOI) by its total revenue.
14. Debt Yield: Evaluates the property’s ability to service its debt by comparing its net operating income (NOI) to its total loan amount. It’s calculated by dividing the property’s NOI by its total debt.
15. Break-even Ratio: Indicates the level of income needed to cover operating expenses and debt service. It’s calculated by dividing the sum of operating expenses and debt service by the property’s gross potential income.
16. Rent Growth Rate: Measures the rate at which rental prices are increasing over a specific period in a particular market, indicating trends in rental demand and market dynamics.


These ratios offer further insights into the financial performance, risk assessment, and market dynamics of real estate investments, helping investors make informed decisions and manage their portfolios effectively.