Real Estate Terminology
What is a joint venture?
2+ investors
What term is used for "investing in multiple properties to reduce risk"
Diversification
What is NOI? What does it do?
Net Operating Income. Measures the difference between Operating Revenue - Operating Expenses
What does a real estate agent/broker primarily do?
Helps clients buy, sell, or rent properties
What's a cap rate?
A cap rate is used to measure risk of an asset. The higher the cap rate, the more risk.
NOI/Value of a Property = Cap Rate
What is SOFR?
Secured Overnight Financing Rate
What is "house hacking"?
Buying a 2-4 unit property and living in one unit and renting out the rest of the units
What is ROI? What does it do?
Return on Investment
What role oversees the day-to-day operations of a property?
Property manager
What is CAM?
Common Area Maintenance - it's a fee paid by tenants to the landlord to help cover costs associated with shared areas.
What is title insurance?
An insurance policy that covers past title problems that come up after you buy or refinance a property that was unknown at the time of purchase
The "BRRRR" strategy stands for
Buy, rehab, refinance, rent, repeat
What is IRR? What does it do?
Internal Rate of Return
Who is the middle-man between a buyer and a seller when someone needs to sell a commercial real estate property?
A broker
Which is riskier a hotel or a multifamily building and why?
What is an interest rate cap?
A limit on how high an interest rate can rise on variable-rate debt
Name the four investment strategies
Core, Core-Plus, Value-Add, Opportunistic
What is a REIT? What does it do?
Real Estate Investment Trust. A REIT is a company that owns, operates, or finances income-producing real estate.
What is the role of a real estate lender or mortgage broker?
Professional that assists clients in securing loans or financing for real estate purchases
What metrics are commonly used to evaluate the returns of a real estate investment? (Name 2)
Cash on Cash return, Internal Rate of Return, Equity Multiple, Return on Investment
What is a Letter of Intent (LOI)?
An LOI is a document declaring preliminary commitment of one party to do business with another.
It outlines key aspects of the deal.
Which of the four investment strategies is the most risky and why?
Opportunistic.
It's most risky because it typically requires a complete overhaul of the property. Lots of money goes into renovating and fixing up the property which leaves a lot of opportunity for something to go wrong.
What is DSCR? What does it do?
Debt Service Coverage Ratio. It shows a company's ability to cover its total debt payments (principal & interest) from its operating income.
Who evaluates property values, market trends, and investment opportunities?
Appraisers
What's the difference between a fixed-rate loan and a floating-rate loan?
A fixed-rate loan has an interest rate that never changes.
A floating-rate loan has an interest rate that can go up or down based on market conditions.