Definitions depend on the transaction.
Real estate terminology can vary by jurisdiction, lender, loan program, contract, tax treatment, and investor community. Informal investor slang is identified where appropriate. Legal, lending, and tax definitions should always be applied according to the specific transaction and applicable rules.
Core BRRRR Terminology
BRRRR: Buy, Rehab, Rent, Refinance, Repeat
A real estate investment strategy where an investor purchases a property, improves it, rents it, refinances it based on its stabilized value and income, then redeploys recovered capital into another property.
Purchase Price
The amount paid to acquire the property.
ARV: After Repair Value
The estimated market value of a property after the planned repairs or renovations have been completed.
Rehab Cost / Renovation Cost
The amount spent repairing, renovating, or improving a property.
All In Cost
The total economic cost of completing a real estate project. Depending on the analysis, this may include purchase price, renovation costs, financing costs, closing costs, carrying costs, permits, utilities, and other project expenses.
Total Project Cost
The total amount required to acquire, renovate, finance, and stabilize a property.
All In Basis
Investor terminology for the total economic amount invested in a property after including the acquisition price and applicable renovation, financing, closing, carrying, and other project costs.
Deal Basis
Investor terminology describing the economic cost basis being used to analyze a deal. The exact components should be stated because investors may calculate it differently.
Cost Basis
The property's basis for accounting or tax purposes. Cost basis is not necessarily identical to total project cost because tax rules determine which expenses are capitalized, depreciated, or deducted.
Stabilization
The stage at which renovations are substantially complete, the property is rentable or occupied, and operations have reached a reasonably normal condition.
Stabilized Property
A property that has generally completed renovation and lease up and is operating at or near its expected normal performance.
Turnkey Property
A property that is already renovated or otherwise ready to rent with little or no immediate work required.
Value Add Property
A property where improvements to condition, rents, occupancy, expenses, management, or operations may increase its income or value.
Forced Appreciation
An increase in property value caused primarily by actions taken by the owner, such as renovations, rent increases, expense reductions, or operational improvements rather than simply waiting for broader market appreciation.
Refinancing and Lending Terminology
Refinance / Refi
Replacing an existing loan with a new loan.
Cash Out Refinance
A refinance where the new financing exceeds the debt and transaction obligations being paid at closing, allowing the borrower to receive cash proceeds.
Rate and Term Refinance
A refinance primarily used to replace or restructure existing debt without materially increasing the borrower's cash proceeds. The interest rate, loan term, amortization, or other financing terms may change.
Cash to Close
The amount of money the borrower must bring to closing after accounting for the new loan, existing debt payoff, lender fees, title charges, taxes, insurance escrows, prepaid items, credits, and other closing adjustments.
Cash Out
Money actually received by the borrower from a refinance after applicable debt, costs, reserves, and deductions have been satisfied.
Cash In Refinance
A refinance where the borrower must contribute additional cash at closing rather than receiving cash out.
Loan Proceeds
Money provided through a financing transaction.
Gross Loan Amount
The stated principal amount of the new loan before fees, escrows, reserves, and other deductions.
Net Loan Proceeds
The amount of loan proceeds remaining after applicable deductions.
Loan Payoff
The amount required to completely satisfy an existing loan as of a specified payoff date.
LTV: Loan to Value Ratio
The loan amount divided by the property's applicable value.
Maximum LTV
The highest loan to value ratio a lender is willing to permit under its underwriting guidelines.
LTC: Loan to Cost Ratio
The loan amount divided by the qualifying cost of the project.
CLTV: Combined Loan to Value Ratio
The combined balance of multiple loans secured by a property divided by the property's value.
DSCR: Debt Service Coverage Ratio
A measurement of the relationship between qualifying property income and qualifying debt obligations.
DSCR Loan
An investment property loan primarily underwritten using the rental property's income relative to its required debt payment rather than relying primarily on the borrower's traditional personal income.
Debt Service
Required payments associated with debt. The exact definition used in DSCR calculations varies by lender and loan program.
P&I: Principal and Interest
The principal repayment and interest portions of a mortgage payment.
PITI: Principal, Interest, Taxes, and Insurance
A common measurement of the major monthly property financing obligations.
PITIA: Principal, Interest, Taxes, Insurance, and Association Dues
PITI plus applicable homeowners association or association expenses.
Amortization
The gradual repayment of loan principal through scheduled payments over time.
Amortization Period
The period over which scheduled loan payments are calculated.
Loan Term
The contractual length of the loan before maturity.
Maturity Date
The date on which the remaining contractual loan balance becomes due.
Balloon Payment
A substantial remaining loan balance that becomes due at the end of the loan term.
Interest Only Loan
A loan where scheduled payments during an interest only period generally consist of interest without scheduled principal amortization.
Fixed Rate Loan
A loan where the contractual interest rate remains fixed for the applicable period.
ARM: Adjustable Rate Mortgage
A loan where the interest rate may change according to contractual rules and an underlying index or benchmark.
Points
Upfront financing charges expressed as a percentage of the loan amount. One point equals 1% of the loan amount.
Origination Fee
A fee charged by a lender for originating the loan.
Underwriting Fee
A fee associated with evaluating and processing the loan application.
Prepayment Penalty
A contractual charge that may apply when a borrower repays a loan before a specified period.
Prepayment Step Down
A prepayment penalty structure where the applicable penalty decreases over time.
Yield Maintenance
A prepayment provision designed to compensate a lender for some of the interest income it may lose when a borrower repays debt earlier than expected.
Recourse Loan
A loan where the lender may have contractual claims against the borrower or guarantor beyond the collateral, depending on the agreement and applicable law.
Nonrecourse Loan
A loan where the lender generally relies primarily on the collateral for repayment, although nonrecourse loans commonly contain specific carveouts that may create personal liability under certain circumstances.
Personal Guarantee
A contractual promise making an individual personally responsible for specified obligations of a loan or business.
Seasoning
The amount of time a borrower must own a property, or a loan must remain outstanding, before certain lender requirements are satisfied.
Title Seasoning
The amount of time the current owner has held legal title to the property.
Cash Out Seasoning
A lender required ownership period before the borrower may qualify for certain cash out refinance treatment or use a newly established market value.
Bridge Loan
Short term financing intended to bridge the period between acquisition and a later event such as renovation completion, stabilization, sale, or permanent refinancing.
Hard Money Loan
Short term, generally asset focused financing commonly used for acquisitions, renovations, flips, or BRRRR projects. Interest rates and fees are typically higher than long term mortgage financing.
Private Money Loan
Financing provided by a private individual, investment group, or private organization rather than through traditional residential mortgage channels.
Permanent Financing
Longer term financing intended to remain in place after the property has been acquired, renovated, or stabilized.
Transactional Funding
Very short term financing commonly used to fund the first purchase in a double closing or other short duration transaction.
Gap Funding
Financing used to cover a portion of a transaction that is not funded by the primary lender or the investor's available capital.
Earnest Money Lending
Investor terminology for providing another investor with capital to fund an earnest money deposit in exchange for an agreed fee or return. The structure may be subject to applicable lending and securities laws depending on the facts.
Gator Lending
Informal and relatively recent investor slang for providing short term private capital for items such as earnest money, down payments, closing gaps, or similar transaction funding. The term has no universal institutional definition.
Cross Collateralization
A financing structure where one loan is secured by more than one asset or where additional property is pledged as collateral for a debt.
Blanket Loan
A single loan secured by multiple properties or parcels.
Portfolio Loan
A loan that the originating lender generally intends to retain in its own loan portfolio rather than sell into a conventional secondary market execution.
Property Valuation Terminology
CMA: Comparative Market Analysis
An estimate of property value based primarily on comparable properties and market data, commonly prepared by a real estate professional or investor. A CMA is not the same as a formal appraisal.
Appraisal
A professional opinion of property value prepared by a licensed or certified appraiser.
Appraised Value
The value concluded by an appraiser.
As Is Value
The estimated market value of a property in its present condition.
As Completed Value
The estimated value of a property assuming specified improvements or construction have been completed.
Market Value
The estimated amount a property would command in an open and competitive market under the assumptions applicable to the valuation.
Comp
Common shorthand for a comparable property.
Comparable Sale
A similar property sale used as evidence when estimating the value of another property.
Sales Comparison Approach
A valuation method based primarily on comparing the subject property with similar properties that have recently sold.
Income Approach
A valuation method that derives property value primarily from the income the property can generate.
Cost Approach
A valuation method based on the value of the land plus the estimated replacement or reproduction cost of improvements, adjusted for applicable depreciation.
Price Per Square Foot
Property price or value divided by applicable square footage. It can be useful as a comparison metric but should not be treated as a complete valuation method by itself.
Haircut
Informal terminology for applying a conservative reduction to an assumed value, price, payoff, proceeds amount, or other underwriting figure.
Rental Income and Expense Terminology
Gross Scheduled Rent
The total rent that would be generated if all rentable units were occupied and paying their scheduled contractual rent.
Gross Potential Rent
The theoretical rental income a property could produce if all rentable units were fully occupied at the assumed rental rates.
Gross Rental Income
Rental income generated before operating expenses are deducted.
Other Income
Property income generated outside base rent, such as laundry income, parking, pet fees, storage fees, or utility reimbursements.
Vacancy
A rentable unit or rentable space that is currently unoccupied.
Vacancy Rate
The percentage of rentable units, or available unit time, that are unoccupied during a specified period.
Vacancy Loss
Rental income lost specifically because rentable units are vacant.
Credit Loss
Rental income lost because amounts owed by tenants are not collected.
Collection Loss
Rent or other income that was due but not collected.
Economic Vacancy
The total economic reduction in potential revenue caused by factors such as physical vacancy, concessions, delinquency, nonpayment, and other income losses.
EGI: Effective Gross Income
Gross potential income adjusted for vacancy and collection losses, plus qualifying other property income.
Operating Expenses
Recurring expenses required to operate the property, such as property taxes, insurance, management, maintenance, owner paid utilities, administrative expenses, and similar operating costs.
NOI: Net Operating Income
Property income after operating expenses but before financing costs, income taxes, depreciation, and typically capital expenditures.
Net Cash Flow
The cash remaining after property income is reduced by specified expenses and debt payments. Investors should state exactly which expenses are included in the calculation.
CFBT: Cash Flow Before Tax
Cash generated by the property before accounting for the investor's income tax consequences.
CFAT: Cash Flow After Tax
Cash flow remaining after accounting for applicable income tax consequences.
Investment Return and Ratio Terminology
Cap Rate: Capitalization Rate
Net operating income divided by property value or acquisition price, depending on the analysis.
Cash on Cash Return
Annual pretax cash flow divided by the investor's cash invested using the particular investment basis being analyzed.
Post Refinance Cash on Cash Return on Remaining Cash Invested
Annual pretax cash flow divided by the amount of the investor's cash that remains invested after the refinance.
ROI: Return on Investment
A broad measure of investment return relative to invested capital. The exact calculation should be defined because different analyses may include different sources of return.
ROE: Return on Equity
Return generated relative to the investor's current equity in the property.
IRR: Internal Rate of Return
The annualized discount rate that causes the net present value of projected investment cash flows to equal zero. IRR incorporates the timing of cash flows.
NPV: Net Present Value
The present value of expected future cash flows minus the present value of the capital required to generate them.
Equity Multiple
Total cash received from an investment divided by total cash invested.
Total Return
The overall economic return generated by an investment, potentially including cash flow, principal reduction, appreciation, and disposition proceeds depending on the calculation.
Levered Return
Investment return after considering the effect of debt financing.
Unlevered Return
Investment return calculated without considering debt financing.
Expense Ratio
A generic term comparing specified property expenses with specified property revenue. Because usage varies, the numerator and denominator should always be clearly stated.
OER: Operating Expense Ratio
Operating expenses divided by effective gross income.
Debt Yield
Net operating income divided by the outstanding or proposed loan amount.
Break Even Occupancy
The approximate occupancy level required for property income to cover specified operating expenses and debt obligations.
GRM: Gross Rent Multiplier
Property price divided by annual gross rental income.
Rent to Price Ratio
Monthly rent divided by the property purchase price.
1% Rule
A rough screening heuristic suggesting that monthly gross rent should approximate 1% of the property's purchase price or, under some versions, total acquisition cost. It is not a substitute for complete underwriting.
50% Rule
A rough real estate investing heuristic suggesting that operating expenses may consume approximately half of rental revenue before mortgage payments. It should not replace property specific expense underwriting.
Equity and Capital Terminology
Equity
Property value minus outstanding debt secured by the property.
Initial Equity
Equity held or created at the time of acquisition.
Forced Equity
Equity created through purchasing below market value, renovating the property, improving operations, increasing income, or otherwise increasing value.
Equity Capture
Acquiring a property at a sufficiently favorable basis, or otherwise structuring an acquisition, so that meaningful equity exists at or shortly after acquisition.
Equity Spread
Investor terminology for the difference between a property's applicable market value and the investor's acquisition basis or other specified cost measure.
Sweat Equity
Value created through the investor's own labor, management, or direct involvement rather than solely through invested capital.
Equity Position
The owner's financial interest in the property after considering outstanding debt.
Equity Partner
A person or entity contributing capital or other agreed value in exchange for an ownership interest rather than merely receiving a fixed lender return.
Equity Split
An arrangement dividing ownership, profits, cash flow, appreciation, or other economics among equity participants according to an agreed structure.
Original Cash Invested
The investor's own cash contributed toward acquiring, renovating, financing, and stabilizing the property.
Cash Recovered
The amount of the investor's previously invested capital returned through refinancing or another transaction.
Cash Left in the Deal
The portion of the investor's original cash investment that remains economically invested after refinancing or capital recovery.
Full Capital Recovery
A situation where essentially all of the investor's original cash investment has been returned.
Partial Capital Recovery
A situation where the investor recovers some, but not all, of the original cash invested.
Capital Extraction
The process of withdrawing equity or invested capital from a property, commonly through refinancing.
Capital Recycling
Recovering invested capital from an existing property and redeploying that capital into additional investments.
Capital Velocity / Velocity of Capital
The speed at which invested capital can be recovered and redeployed into additional investments.
Infinite Return
Informal investor terminology sometimes used when the investor has recovered all original invested cash while continuing to own an income producing property. Under a conventional cash on cash formula, however, a zero denominator makes the ratio mathematically undefined. Infinite return should therefore be treated as investor shorthand rather than a literal conventional return metric.
Leverage
The use of borrowed capital to control an asset larger than the investor's direct cash investment.
Positive Leverage
A situation where the use of debt improves the investor's return on equity because the economics of the asset exceed the effective financing cost.
Negative Leverage
A situation where the financing structure reduces the investor's return relative to the property's unlevered economics.
Principal Paydown
Reduction of outstanding loan principal as mortgage payments are made.
Equity Growth
An increase in ownership equity caused by appreciation, principal paydown, renovation, income growth, or other forms of value creation.
Acquisition and Contract Terminology
Acquisition Cost
The cost of acquiring a property. Depending on the analysis, this may include the purchase price plus acquisition related expenses.
Acquisitions
In real estate investing organizations, the function or team responsible for sourcing opportunities, communicating with sellers, evaluating deals, negotiating terms, and obtaining properties under contract.
Buy Box
The specific criteria defining the types of properties or deals an investor is willing to pursue, such as market, property type, price range, condition, rent, return targets, and financing requirements.
MAO: Maximum Allowable Offer
The highest price an investor determines can be paid for a property while still satisfying the investor's required economics and risk parameters.
Lowball Offer
Informal terminology for an intentionally aggressive offer that is substantially below the seller's asking price or perceived market value.
Closing Costs
Expenses incurred in completing a purchase, sale, or refinance transaction.
Down Payment
The borrower's cash contribution toward a property purchase that is not financed by the primary acquisition loan.
EMD: Earnest Money Deposit
Money deposited by the buyer under a purchase agreement to demonstrate commitment to the transaction.
Due Diligence
Investigation of the property's condition, finances, leases, title, zoning, legal status, environmental considerations, and other relevant factors before completing the transaction.
Inspection Period
The contractual period during which the buyer may conduct inspections and other permitted due diligence.
Contingency
A contractual condition that must be satisfied or waived for the transaction to proceed under the agreed terms.
Financing Contingency
A contractual provision protecting the buyer under specified circumstances if acceptable financing cannot be obtained.
Appraisal Contingency
A contractual provision providing specified rights or remedies if the property does not appraise at the required value.
Contingent Sale
A transaction where completion depends on one or more specified contractual conditions being satisfied or waived.
Closing Date
The date on which the transaction is legally and financially completed.
Settlement Statement
A document showing the financial components of a transaction, including charges, credits, loan amounts, taxes, and funds due.
Closing Disclosure
A disclosure used in applicable mortgage transactions showing the loan terms and closing costs.
Seller Concession
A contribution by the seller toward specified transaction expenses, subject to the purchase agreement and applicable financing rules.
Seller Credit
A credit provided by the seller toward qualifying buyer expenses.
Cash Sale
A property purchase completed without the buyer obtaining purchase money mortgage financing for the acquisition.
Arms Length Transaction
A transaction between independent parties acting in their own economic interests without a relationship that materially influences the transaction terms.
Non Arms Length Transaction
A transaction between parties who have an existing relationship, affiliation, common ownership, family connection, business relationship, or other connection that may affect the transaction terms.
As Is Sale
A sale where the seller generally does not agree to perform specified repairs or improvements before closing, subject to contractual terms, disclosure requirements, and applicable law.
FSBO: For Sale by Owner
A property marketed for sale directly by the owner without employing a traditional listing agent for the transaction.
Off Market Sourcing and Investor Terminology
Bird Dogging
Investor slang for locating potential distressed properties, off market opportunities, or motivated sellers and passing the lead to another investor. Compensation rules and licensing requirements can vary significantly by jurisdiction and by the activities performed.
Driving for Dollars
Physically scouting neighborhoods to identify properties that may be vacant, neglected, distressed, or otherwise potential investment opportunities.
Driving for Deeds
Less common investor slang generally referring to researching ownership or title information after identifying potential properties. Usage is not standardized.
Skip Tracing
Using lawful data sources and research methods to locate contact information associated with a property owner or other person. Applicable privacy, solicitation, consumer protection, and communications laws still apply.
Off Market Property / Off Market Deal
A property opportunity being negotiated, marketed, or acquired without broad public exposure through the traditional MLS listing process.
On Market Property
A property publicly offered for sale, commonly through a real estate brokerage and listing service.
MLS: Multiple Listing Service
A cooperative database used by participating real estate professionals to publish and share property listing and transaction information.
Pocket Listing
A property listing receiving limited or private marketing rather than broad exposure through the applicable MLS, subject to brokerage rules and applicable law.
Pocket Deal
Informal investor terminology for an opportunity kept within a limited investor or buyer network before broader marketing.
Absentee Owner Lead
A potential acquisition lead involving a property whose owner appears to live at a different address from the property.
Probate Lead
A potential property opportunity arising from the death of an owner and the administration of the owner's estate.
Tired Landlord
Investor slang for a landlord perceived to be motivated to sell because of management burdens, tenant problems, vacancies, repairs, financial pressures, or similar circumstances.
Distressed Seller
A seller experiencing financial, legal, property, personal, or operational circumstances that may create unusual pressure or motivation to sell.
Motivated Seller
Informal investor terminology for an owner who has a strong financial, personal, operational, or timing related reason to sell a property. A motivated seller is not necessarily financially distressed.
Wholesaling and Disposition Terminology
Wholesaling / Wholesale Transaction
A transaction strategy where an investor obtains contractual rights to purchase a property and typically assigns those rights or otherwise transfers the opportunity to another buyer for compensation. State laws, disclosure requirements, marketing restrictions, and licensing rules can materially affect how wholesaling may lawfully be conducted.
Reverse Wholesaling
An investor strategy where the investor first identifies the needs of an end buyer and then searches specifically for properties matching that buyer's criteria.
Wholetailing
Informal investor terminology for buying a property, performing little or limited renovation compared with a full flip, and then reselling it through a more conventional retail marketing process.
Daisy Chaining
Investor slang for a transaction where contractual rights or the economic interest in a wholesale opportunity are passed through multiple intermediaries before reaching the ultimate buyer. The legality and enforceability of each step depend on the contracts and applicable law.
Assignment / Assignment of Contract
The transfer of contractual rights, and where applicable obligations, from one party to another when permitted by the contract and applicable law.
Assignment Fee
Compensation received by an assignor for transferring contractual rights to another party.
Assignable Contract
A contract that permits specified contractual rights to be transferred to another party, subject to its terms and applicable law.
Wholesale Spread
Investor terminology for the economic difference between the wholesaler's contracted acquisition price and the amount paid or committed by the end buyer, before considering expenses and transaction structure.
Double Close / Back to Back Closing
A transaction structure involving two separate closings, commonly where an intermediary first acquires a property and then resells it to another buyer shortly afterward.
Disposition / Deal Dispo
Disposition broadly means the sale or transfer of an investment property. In wholesale and investment company terminology, deal dispo commonly refers to marketing a contracted investment opportunity and locating an end buyer.
Creative Finance Terminology
Creative Finance
Informal umbrella terminology for real estate financing structures outside a simple conventional purchase mortgage, including seller financing, subject to acquisitions, wraps, lease options, private financing, and similar structures.
Seller Financing / Owner Financing / Carryback
A transaction where the seller finances some or all of the buyer's purchase price rather than requiring the entire purchase price to be funded by the buyer or a third party lender.
Land Contract / Contract for Deed
A seller financed arrangement where the buyer generally makes payments under a contract while legal title remains with the seller until specified contractual conditions are satisfied. Rights and remedies vary materially by state law.
Installment Sale
For federal income tax purposes, generally a sale where at least one payment is received after the tax year in which the sale occurs. Seller financing frequently creates an installment sale, although tax eligibility and treatment depend on the transaction.
Subject To / Sub2 Transaction
A transaction where a buyer acquires ownership of property while the seller's existing financing remains in place. The buyer does not necessarily formally assume the loan, the original borrower may remain liable to the lender, and the transfer may implicate a due on sale clause.
Due on Sale Clause
A loan provision that may permit a lender to accelerate the secured debt when ownership or another qualifying interest in the property is transferred without required lender consent, subject to applicable law and statutory exceptions.
Assumable Mortgage
A mortgage that permits a qualified buyer to take over the seller's existing loan obligations under specified conditions.
Loan Assumption
The process through which another borrower formally assumes responsibility for an existing loan according to the lender's requirements and loan terms.
Wraparound Mortgage / Wrap
A seller financing structure where a new obligation to the seller incorporates or wraps around an existing underlying mortgage. The underlying loan generally remains in place, and the structure may implicate due on sale provisions and other legal or servicing requirements.
Lease Option
An arrangement combining a lease with an option giving the tenant or another party the right, but generally not the obligation, to purchase the property under specified terms.
Lease Purchase
An arrangement combining occupancy under a lease with a contractual purchase commitment or other structured obligation to purchase, depending on the specific agreement.
Master Lease
An arrangement where one party leases an entire property or portfolio and obtains contractual operating rights that may include managing or subleasing portions of the property, subject to the lease and applicable law.
Option Contract
A contract giving one party the right, but generally not the obligation, to purchase property under specified terms within a specified period.
Right of First Refusal
A contractual right giving a party the opportunity to purchase property before the owner completes a qualifying sale to another buyer according to the terms of the agreement.
Novation
A contractual arrangement where a new party or obligation replaces an existing party or obligation with the required consent of the affected parties. Some investors use specially structured novation agreements as an alternative to conventional assignment transactions, but the rights created depend entirely on the contract and applicable law.
Deal Stacking
Informal investor terminology for combining multiple sources of debt, equity, seller financing, private capital, or other financing to complete a single transaction.
Distressed Property and Foreclosure Terminology
Foreclosure
The legal process through which a lender or other secured creditor enforces its interest in real property following a qualifying default, subject to applicable law and the loan documents.
Preforeclosure
The period after mortgage delinquency or default has progressed toward foreclosure but before the foreclosure process has been completed.
Default
Failure to satisfy a contractual obligation, such as making required loan payments or complying with another material loan term.
Mortgage Default
Failure to comply with obligations under a mortgage loan, commonly including failure to make required payments.
Notice of Default
A formal notice stating that a borrower has failed to satisfy specified obligations under a loan or security agreement.
Lis Pendens
A recorded notice indicating that litigation affecting title to or an interest in real property is pending.
Short Sale
A property sale approved by the applicable lender or servicer where the sale proceeds are insufficient to fully satisfy the mortgage debt. Deficiency treatment depends on the agreement and applicable law.
Short Payoff
An arrangement where a lender or creditor agrees to accept less than the full amount owed in order to release or satisfy a debt or lien.
Deed in Lieu of Foreclosure
An arrangement where a borrower voluntarily transfers ownership of the property to the lender or creditor in connection with resolving secured debt instead of completing the foreclosure process.
REO: Real Estate Owned / Bank Owned Property
Property owned by a lender, bank, government entity, or other institution after it acquires the property, commonly following foreclosure or an unsuccessful foreclosure auction.
REO Sale
The subsequent sale of real estate owned by a lender or institution after it has acquired the property.
Foreclosure Auction
A public or legally authorized sale of property conducted as part of the foreclosure process.
Sheriff Sale
A property sale administered by a sheriff or other authorized official, commonly in connection with judicial foreclosure, tax enforcement, or judgment enforcement depending on applicable law.
Judicial Foreclosure
A foreclosure process conducted through the court system.
Nonjudicial Foreclosure
A foreclosure process conducted without a traditional foreclosure lawsuit when permitted by applicable law and the security instrument.
Tax Sale
A sale conducted through a governmental process because qualifying property tax obligations remain unpaid.
Tax Foreclosure
A legal process through which a governmental entity or other authorized holder enforces delinquent property tax rights against real property, potentially leading to a sale or transfer of the property.
Tax Lien Sale
A process where a governmental authority sells a lien, certificate, or other interest associated with unpaid property taxes rather than necessarily selling the property itself.
Tax Deed Sale
A process where title to tax delinquent property may be sold or transferred after applicable statutory requirements have been satisfied.
Redemption Period
A period provided under applicable law during which an eligible borrower, owner, or other party may have a right to reclaim property after specified foreclosure or tax sale events by satisfying applicable requirements.
Right of Redemption
A statutory or contractual right that may allow an eligible party to recover property by paying required amounts within the applicable redemption period.
Deficiency Balance
The remaining debt after collateral has been sold and the proceeds are insufficient to fully satisfy the secured obligation.
Deficiency Judgment
A court judgment that may permit a creditor to pursue a borrower for a qualifying unpaid deficiency after foreclosure or another collateral disposition, subject to applicable law and loan terms.
Distressed Property
A broad term for property affected by financial, legal, physical, operational, or ownership problems that may create pressure to sell or otherwise resolve the property's status.
Distressed Sale
A property sale influenced by foreclosure risk, bankruptcy, tax delinquency, severe property condition, financial pressure, or another unusual circumstance affecting the seller.
Zombie Property
Informal terminology commonly describing a vacant or abandoned property caught in foreclosure, title, servicing, or ownership limbo. In some situations the borrower may still legally own the property despite having left it.
Probate Sale
A property sale involving an estate being administered through probate or another estate settlement process.
Estate Sale
The sale of property owned by the estate of a deceased person.
Bankruptcy Sale
A property transaction involving an owner or entity in bankruptcy that may be subject to bankruptcy law, creditor rights, trustee authority, or court approval.
Court Ordered Sale
A property sale required or authorized by a court, often in connection with foreclosure, partition, bankruptcy, divorce, estate administration, or judgment enforcement.
Partition Sale
A court ordered or agreed sale of jointly owned property associated with terminating or dividing ownership interests.
Rehab and Construction Terminology
SOW: Scope of Work
A detailed description of the repairs, improvements, and construction work to be completed.
Rehab Budget
The projected cost of completing the planned renovations.
Draw
A release of renovation or construction loan funds.
Draw Schedule
The schedule or milestone system governing when construction or renovation funds are released.
Contingency Reserve
Money set aside for unexpected renovation costs or project overruns.
Change Order
A modification to the original construction scope, specifications, price, or schedule.
GC: General Contractor
The contractor responsible for overseeing and coordinating the overall construction or renovation project.
Subcontractor
A contractor responsible for a specialized part of the work, such as electrical, plumbing, roofing, HVAC, or flooring.
Permit
Government authorization required for specified construction, renovation, or property use activities.
CO: Certificate of Occupancy
Government documentation indicating that a property or space has met applicable requirements for lawful occupancy.
Holding and Carrying Cost Terminology
Holding Costs / Carrying Costs
Expenses incurred while owning a property during acquisition, renovation, stabilization, lease up, or the period before sale or refinance. These can include interest, taxes, insurance, utilities, maintenance, lawn care, snow removal, security, and association fees.
Interest Carry
Interest expense incurred while holding and financing the property during a project.
Reserve
Cash set aside to cover future expenses, uncertainties, or unexpected events.
Operating Reserve
Cash maintained to cover ordinary property operating expenses and temporary income shortfalls.
CapEx Reserve: Capital Expenditure Reserve
Money set aside for significant future repairs, replacements, or improvements.
Property Management Terminology
Property Management Fee
Compensation paid to a property manager for operating and managing the rental property.
Leasing Fee
A fee charged for locating, screening, and placing a new tenant.
Renewal Fee
A fee that may be charged when an existing tenant renews a lease.
Tenant Turnover
The process that occurs when an existing tenant leaves and a new tenant must be placed.
Turn Cost
The cost of preparing a unit for the next tenant.
Make Ready
Cleaning, repairs, painting, and other work necessary to prepare a vacant unit for occupancy.
Lease Up
The process of finding tenants and increasing occupancy in a property.
Occupancy Rate
The percentage of rentable units or rentable unit time that is occupied during a specified period.
Rent Roll
A report listing property units, tenants, contractual rents, lease dates, deposits, and other rental information.
Market Rent
The rent a property or unit could reasonably command in the current rental market.
Contract Rent
The amount of rent currently specified in an existing lease.
In Place Rent
The actual contractual rent currently being charged to an existing tenant.
Rent Comps
Comparable rental properties used to estimate achievable market rent.
Security Deposit
Money held according to the lease and applicable law to secure specified tenant obligations.
Delinquency
Rent or another obligation that has not been paid when contractually due.
Multifamily Terminology
SFR: Single Family Residence
A residential property designed primarily for one household.
Duplex
A residential property containing two dwelling units.
Triplex
A residential property containing three dwelling units.
Fourplex / Quadplex
A residential property containing four dwelling units.
Multifamily
Residential real estate containing multiple dwelling units.
Small Multifamily
A term commonly used for smaller multifamily properties. Usage varies by context. In residential lending discussions it often refers informally to two through four unit properties, while commercial multifamily professionals may use the phrase differently.
Commercial Multifamily
In mortgage lending, properties containing five or more residential units are generally treated as multifamily or commercial real estate, while one through four unit properties are generally treated under residential or single family lending frameworks. Terminology can vary by lender and context.
Unit Mix
The combination of different unit types in a property.
Price Per Unit
Property purchase price or value divided by the number of units.
Rent Per Unit
Rental revenue measured on a per unit basis.
Deal Analysis Terminology
Underwriting
The process of analyzing property income, expenses, value, financing, risks, and expected returns to determine whether an investment or loan is acceptable.
Pro Forma
A projection of expected property financial performance based on specified assumptions.
Actuals
Financial results that actually occurred rather than projected results.
T12: Trailing Twelve Months
Financial performance covering the most recent twelve month period.
T3: Trailing Three Months
Financial performance covering the most recent three month period.
Sensitivity Analysis
Testing how investment results change when important assumptions such as rent, vacancy, expenses, ARV, renovation cost, interest rate, or financing terms change.
Stress Test
Modeling deliberately unfavorable conditions to determine how resilient the investment remains.
Base Case
The primary expected investment scenario.
Upside Case
A scenario using assumptions more favorable than the base case.
Downside Case
A scenario using assumptions less favorable than the base case.
Worst Case Scenario
A deliberately severe scenario designed to test investment resilience and potential losses.
Margin of Safety
The financial or operational cushion between expected investment performance and the point at which the investment becomes unacceptable.
Break Even Analysis
Determining the point at which revenue, occupancy, value, or another variable is just sufficient to cover specified obligations.
Title, Closing, and Ownership Terminology
Escrow
Money or documents held by a neutral party until specified transaction requirements are satisfied. Mortgage servicers may also maintain escrow accounts for property taxes and insurance.
Impound Account
Another term commonly used for an account maintained by a lender or servicer to collect and pay property taxes, insurance, or similar obligations.
Title
Legal ownership rights associated with real property.
Title Search
Examination of public records to identify ownership, liens, claims, easements, and other title matters.
Title Insurance
Insurance protecting specified parties against covered title defects and claims.
Lien
A legal claim or security interest attached to property.
First Lien / First Position
The secured debt or claim holding the highest applicable lien priority against the property.
Second Lien
A secured debt with lien priority behind the first lien.
Mortgage
A legal security instrument pledging real property as collateral for a loan.
Promissory Note
The borrower's contractual promise to repay a debt according to specified terms.
Deed
A legal instrument used to transfer ownership of real property.
Deed of Trust
A security instrument used in certain jurisdictions instead of a traditional mortgage structure.
Recording
Filing applicable real estate documents with the appropriate governmental recording office.
Closing / Settlement
The completion of the legal and financial components of a real estate transaction.
Lien Release
A document or legal action removing a lien from a property after the applicable secured obligation has been satisfied or otherwise resolved.
Quiet Title Action
A legal proceeding used to resolve competing ownership claims, defects, or uncertainty regarding interests in real property.
Cloud on Title
A claim, lien, document, error, or other issue creating uncertainty regarding ownership or transferability of real property.
Clear Title
Informal terminology generally describing title without unresolved claims, liens, or defects that materially interfere with transfer, subject to permitted exceptions.
Marketable Title
Title sufficiently free from material defects or reasonable doubt to satisfy applicable legal and contractual standards for transfer.
Auction Terminology
Auction Property
A property offered for sale through a competitive bidding process.
Absolute Auction
An auction where the property is sold to the highest qualifying bidder without a seller reserve price, subject to the auction terms.
Reserve Auction
An auction where the seller retains specified rights to reject a bid that fails to satisfy the applicable reserve or minimum terms.
Appreciation and Wealth Building Terminology
Appreciation
An increase in the property's market value over time.
Market Appreciation
Property value growth caused primarily by broader market conditions rather than direct improvements made by the owner.
Tax Terminology
Depreciation
A tax deduction that generally allows qualifying portions of real estate investment cost to be recovered over an applicable tax recovery period.
Depreciable Basis
The portion of the property's tax basis that is eligible for depreciation.
Capital Improvement
An expenditure that generally improves, restores, or adapts a property and is capitalized rather than immediately deducted, subject to applicable tax rules.
Repair Expense
An expense that may qualify for current deduction rather than capitalization depending on the facts and applicable tax rules.
Capital Gain
Gain recognized on the disposition of an investment asset. For rental real estate, the tax character of gain can depend on factors including depreciation, holding period, property classification, and applicable Sections 1231, 1245, and 1250 of the Internal Revenue Code.
Depreciation Recapture
Tax treatment that may apply when depreciable property is disposed of at a gain, based in part on depreciation previously allowed or allowable. The exact treatment depends on the property and applicable tax rules.
1031 Exchange
A tax deferral mechanism under Section 1031 of the Internal Revenue Code that allows qualifying real property held for investment or productive use in a trade or business to be exchanged for qualifying replacement real property when applicable requirements are satisfied. Property held primarily for sale does not qualify, and receiving cash or other nonqualifying property can cause some gain to be recognized.
Cost Segregation
A tax study that identifies qualifying components of a building that may be depreciated over shorter recovery periods when permitted under applicable tax rules.
Exit Strategy Terminology
Hold
Continue owning and operating the property.
Sell
Transfer ownership of the property to another party in exchange for consideration.
Flip
Purchase a property, typically improve it, then sell it for a profit rather than retaining it as a long term rental.
Refinance and Hold
Replace existing financing with new financing while continuing to own and operate the property.
Exit Strategy
The planned method for ultimately holding, refinancing, selling, exchanging, or otherwise exiting an investment.
Complete BRRRR Example
Suppose an investor acquires and renovates a property with the following economics:
The maximum loan amount based solely on LTV would therefore be:
$170,000 × 75% = $127,500This does not necessarily mean the borrower will actually receive a $127,500 loan. The final loan amount may also be limited by DSCR, lender guidelines, seasoning, borrower qualifications, product restrictions, debt yield requirements, or other underwriting constraints.
Now suppose that, after paying existing debt, refinance costs, reserves, and other required deductions, the refinance returns $115,000 of the investor's original $120,000 cash investment.
$120,000 − $115,000 = $5,000Now suppose the stabilized property generates:
The post refinance cash on cash return on remaining cash invested would be:
$12,000 ÷ $5,000 = 240%Post Refinance Cash on Cash Return on Remaining Cash Invested: 240%
This is why BRRRR analysis should not stop with the question:
“Did I recover every dollar I invested?”
How much capital remains in the property, what cash flow does that remaining capital produce, how much equity exists, what risks remain, and how quickly can the recovered capital be redeployed?
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