A

Abatement
A reduction or elimination of property-related charges, such as taxes or fees. This can be granted for various reasons, including promoting property development, reducing financial burden on owners, or addressing economic hardship. Investors can leverage abatements to increase their profit margins and lower ownership expenses.

Absorption Rate
A measure of how quickly real estate properties are sold or rented in a specific market during a given period. It reflects the supply and demand dynamics of the market. A high absorption rate indicates strong demand, while a low rate may suggest oversupply.

Active Investing
A hands-on real estate strategy where investors are deeply involved in property selection, acquisition, management, and development. This approach requires significant time, expertise, and effort but offers greater control over investments and potential for higher returns.

Ad Valorem Tax
A tax based on the assessed value of a property, commonly used by local governments to fund public services such as schools, roads, and emergency services. Property owners should be aware of how these taxes impact their investment returns.

Adverse Possession
A legal concept allowing an individual to claim ownership of a property by occupying it continuously and openly without the owner’s permission for a specified statutory period. This can be a strategy to acquire abandoned or neglected properties, but it requires careful legal guidance.

Airbnb / Short-Term Rental
A type of investment strategy where properties are rented out on a short-term basis, typically to travelers, using platforms like Airbnb. This approach can generate higher income than long-term rentals but may involve higher management costs and regulatory considerations.

Amortization
The process of paying off a loan in regular installments over time, with each payment including both principal and interest. This schedule helps investors build equity in their property while managing debt efficiently.

Appraisal
A professional assessment of a property’s market value conducted by a licensed appraiser. Appraisals are crucial for determining fair market value, securing financing, and ensuring informed decision-making in real estate transactions.

Appreciation
The increase in a property’s value over time due to factors like market demand, location improvements, or property enhancements. Real estate investors often rely on appreciation to achieve long-term wealth growth.

Assessment
An official valuation of a property’s worth, typically for tax purposes. Assessments can also refer to evaluations conducted by investors to determine a property’s potential return on investment.

Asset Allocation
A diversification strategy where investment funds are distributed across different property types (residential, commercial, industrial) and locations to balance risk and optimize returns.

Auction
A public sale process where properties are sold to the highest bidder. Auctions can be an efficient way to acquire properties quickly, often at discounted prices, but require careful due diligence.

B

Balloon Mortgage
A type of mortgage that involves small regular payments followed by a large lump-sum payment at the end of the loan term. It is often used for short-term financing, but borrowers must plan for the final payment through refinancing or selling the property.

Bankruptcy
A legal process for individuals or entities unable to repay their debts. In real estate, bankruptcy can lead to opportunities to acquire distressed properties at reduced prices, but it also carries risks and complexities.

BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
A popular investment strategy that involves purchasing undervalued properties, renovating them to increase value, renting them out for income, refinancing to pull out equity, and repeating the process to build a portfolio.

Building Codes
A set of regulations governing construction standards to ensure the safety, health, and structural integrity of buildings. Compliance is essential for investors to avoid legal issues and maintain property value.

Buy and Hold
A long-term investment strategy where properties are acquired and held to generate rental income and benefit from appreciation over time. It’s ideal for investors seeking stable cash flow and wealth accumulation.

Buyer’s Market
A market condition where the supply of properties exceeds demand, giving buyers more negotiating power. It often results in lower property prices and favorable terms for investors.

C

Cap Rate (Capitalization Rate)
A metric used to evaluate the return on investment for income-generating properties. It is calculated by dividing the net operating income (NOI) by the property’s purchase price or current market value. A higher cap rate indicates higher potential returns but may also involve higher risk.

Cash Flow
The net income generated by a property after deducting all expenses, including mortgage payments, taxes, insurance, and maintenance. Positive cash flow is crucial for sustaining and growing real estate investments.

Closing Costs
The fees and expenses incurred during the finalization of a real estate transaction. These may include loan origination fees, title insurance, legal fees, and property taxes. Buyers and sellers should budget for these costs.

Comparative Market Analysis (CMA)
A method used by real estate professionals to determine a property’s market value by comparing it to similar properties recently sold in the same area. It helps buyers and sellers make informed pricing decisions.

Commercial Property
Real estate intended for business use, such as office buildings, retail spaces, and warehouses. These properties typically offer higher income potential but involve more complex management and regulations.

Contingency
A clause in a real estate contract that allows one party to back out or renegotiate if certain conditions are not met, such as obtaining financing or passing a property inspection. Contingencies protect buyers and sellers during transactions.

Crowdfunding
A modern investment method where multiple investors pool their funds to finance real estate projects. It provides opportunities for small-scale investors to participate in larger developments and diversify their portfolios.

D

Days on Market (DOM)
The number of days a property is listed for sale before it is sold. A high DOM indicates a slow market or overpriced property, while a low DOM reflects high demand.

Debt-to-Income Ratio (DTI)
A financial metric that compares a borrower’s total monthly debt payments to their gross monthly income. It is used by lenders to assess a borrower’s ability to repay loans and impacts approval rates.

Depreciation
The gradual decrease in a property’s value over time due to wear and tear, aging, or obsolescence. Depreciation provides tax benefits for investors, allowing them to deduct a portion of the property’s cost over its useful life.

Distressed Property
A property that is in poor physical condition or facing financial difficulties, often sold below market value. These properties present opportunities for investors to renovate and resell for profit or hold for appreciation.

Due Diligence
The thorough investigation and analysis conducted before purchasing a property. This includes property inspections, financial audits, market research, and reviewing legal documents to identify risks and ensure informed decisions.

E

Earnest Money
A deposit made by a buyer to demonstrate their serious intent to purchase a property. It is typically held in escrow and applied toward the purchase price at closing.

Easement
A legal right granted to a person or entity to use another person’s land for a specific purpose, such as access roads or utility lines. Easements can affect property value and use.

Equity
The portion of a property’s value that the owner truly owns, calculated by subtracting outstanding mortgage balances from the property’s market value. Equity grows through mortgage payments and appreciation.

Escrow
A financial arrangement where a neutral third party holds funds or documents during a real estate transaction to ensure security until all conditions are met.

Eviction
The legal process of removing a tenant from a rental property due to lease violations, such as non-payment of rent or property damage.

Encroachment
An unauthorized extension or intrusion onto another property, such as a fence or building crossing property lines. Resolving encroachments may require legal action or agreements.

Eminent Domain
The government’s legal power to acquire private property for public use, such as infrastructure projects, while providing fair compensation to the owner.

F

Fair Market Value
The price a property would likely sell for in a competitive and open market, with both buyer and seller acting knowledgeably and without pressure.

FHA Loan
A mortgage insured by the Federal Housing Administration, designed to make homeownership more accessible with low down payments and lenient credit requirements.

Fixed-Rate Mortgage
A loan with an interest rate that remains constant throughout the term, offering predictable monthly payments.

Foreclosure
The legal process where a lender repossesses a property due to the borrower’s failure to make mortgage payments. Foreclosed properties are often sold at auction or as distressed sales.

Flipping
The practice of buying a property, renovating it to increase value, and selling it quickly for a profit. Flipping requires market knowledge, renovation expertise, and financial planning.

Fourplex
A residential building with four separate units, often purchased by investors seeking to generate rental income from multiple tenants.

Fundamental Analysis
An evaluation method that examines economic, financial, and market conditions to determine a property’s intrinsic value and investment potential.

G

Gross Rent Multiplier (GRM)
A valuation metric calculated by dividing a property’s price by its annual gross rental income. It provides a simple way to compare investment opportunities but doesn’t account for expenses.

Government Buildings
Properties owned and used by government entities for public administration, such as courthouses or municipal offices. These properties can be leased long-term for stable income.

Garden Apartment
A low-rise apartment complex surrounded by landscaped grounds, typically offering a quieter suburban living environment with amenities like green spaces and parking.

H

Home Inspection
A detailed examination of a property’s condition, including its structure, systems, and safety features, conducted before purchase to identify potential issues.

Homeowners Association (HOA)
An organization that manages shared spaces and enforces community rules in residential developments. HOAs collect fees from property owners for maintenance and amenities.

Housing Affordability Index
A measure of whether a typical family earns enough income to qualify for a mortgage on a median-priced home. The index helps gauge market accessibility.

Hybrid Mortgage
A loan with an initial fixed interest rate for a specified period, followed by an adjustable rate for the remainder of the term, combining stability and flexibility.

I

Interest Rate
The percentage charged by a lender for borrowing money, expressed annually. Interest rates significantly impact mortgage affordability and investment returns.

Investment Property
Real estate purchased to generate rental income, capital appreciation, or both. These properties include residential, commercial, and industrial assets.

Internal Rate of Return (IRR)
A financial metric used to evaluate the profitability of an investment, considering its cash flows and the time value of money. A higher IRR indicates a more attractive investment.

IDX (Internet Data Exchange)
A system allowing real estate professionals to display property listings from multiple sources on their websites, providing buyers with comprehensive search options.

Improved Land
Land that has been developed with structures, utilities, or landscaping to increase its usability and value.

J

Joint Tenancy
A form of co-ownership where two or more individuals hold equal shares in a property. Upon one owner’s death, their share automatically transfers to the surviving owners.

Job Growth Rate
An economic indicator reflecting the rate of job creation in a specific area, influencing real estate demand and property values.

L

Lease Agreement
A contract outlining the terms and conditions between a landlord and tenant for renting a property. It specifies rent amount, duration, and responsibilities.

Loan-to-Value Ratio (LTV)
A metric comparing the loan amount to a property’s appraised value, expressed as a percentage. Lenders use it to assess risk.

Lien
A legal claim against a property as security for a debt, which must be resolved before the property can be sold or refinanced.

Long-Term Rental
A property leased to tenants for extended periods, typically a year or more, offering consistent income and tenant stability.

M

Market Value
The price a property would fetch in an open and competitive market under normal conditions.

Mixed-Use Property
A development combining residential, commercial, and sometimes industrial uses within one project, offering diverse income streams.

Mortgage
A loan secured by real estate, used by buyers to finance property purchases. The property serves as collateral until the loan is repaid.

Multifamily Housing
Residential properties with multiple units, such as apartment buildings or duplexes, generating income from multiple tenants.

N

Net Operating Income (NOI)
A property’s income after operating expenses but before taxes and financing costs. It’s a key metric for evaluating income-producing properties.

Notice to Vacate
A formal notice given by a landlord or tenant to terminate a lease agreement, specifying the move-out date.

O

Owner Financing
A financing method where the property seller provides the loan to the buyer, allowing for flexible terms and bypassing traditional lenders.

Occupancy Rate
The percentage of rented or occupied units in a property. A high occupancy rate indicates strong demand and effective property management.

P

Property Management
The administration of rental properties, including tenant relations, maintenance, and financial oversight, ensuring efficient operations.

Passive Income
Earnings generated from rental properties or investments with minimal active involvement, providing financial stability.

Property Taxes
Taxes levied by local governments based on a property’s assessed value. These funds are used for public services such as schools and infrastructure.

R

Real Estate Investment Trust (REIT)
A company that owns, operates, or finances income-generating real estate. REITs allow individuals to invest in large-scale properties through shares.

Rental Yield
A measure of rental income as a percentage of a property’s value, used to evaluate investment profitability.

Refinancing
Replacing an existing loan with a new one, often to secure better terms, lower interest rates, or access equity.

T

Title Insurance
A policy protecting property buyers and lenders from financial losses due to title defects, liens, or ownership disputes.

Tax Lien
A legal claim by the government on a property due to unpaid taxes, which must be resolved to clear the property’s title.

Z

Zoning
The division of a city or area into sections reserved for different purposes, such as residential, commercial, or industrial use. Zoning helps ensure compatible land use and orderly growth. Changes or exceptions to zoning rules, known as rezoning or variances, can significantly impact property values and investment potential.

Zoning Laws
Regulations governing land use and development to ensure orderly urban planning, property value protection, and adherence to community standards.