Real Estate Basics
This term refers to an increase in the value of a property over time.
What is appreciation?
This term refers to the initial payment made by a borrower when purchasing a property.
What is a down payment?
This term refers to the income generated from renting out a property.
What is rental income?
This term refers to buying a property at a low price with the intention of selling it quickly for a profit.
What is house flipping?
This type of lease requires the tenant to pay a base rent plus a percentage of their sales.
What is a percentage lease?
The process of combining multiple adjacent properties into a single larger plot is called this.
What is land consolidation?
This ratio is used by lenders to determine a borrower's ability to repay a mortgage and is calculated by dividing total monthly debt payments by gross monthly income.
What is the debt-to-income ratio (DTI ratio)?
The ratio of a property's annual net operating income to its purchase price is known as this.
What is the capitalization rate (cap rate)?
These professionals help investors determine the cost of repairs and renovations needed for a property.
Who are contractors or general contractors?
This metric measures the profitability of a commercial property and is calculated by dividing the property's net operating income by its purchase price.
What is the capitalization rate (cap rate)?
This document outlines the legal description, purchase price, and terms of a real estate transaction.
What is a purchase agreement or contract?
This type of mortgage has a fixed interest rate for the entire term of the loan.
What is a fixed-rate mortgage?
This type of lease requires the tenant to pay for additional expenses such as property taxes, insurance, and maintenance costs.
What is a triple net lease (NNN lease)?
This term describes a property that is sold as-is, with no warranties or guarantees from the seller.
What is a property sold in "as-is" condition?
This term refers to the process of analyzing the income potential and expenses of a commercial property.
What is a commercial property analysis or a pro forma analysis?
This type of lease allows for rent to increase periodically based on a predetermined formula.
What is an escalator or step-up lease?
This federal law requires lenders to disclose the true cost of borrowing, including the interest rate, loan terms, and closing costs.
What is the Truth in Lending Act (TILA)?
This strategy involves purchasing a distressed property, making renovations, and then renting it out for long-term cash flow.
What is the buy-and-hold strategy?
This financing strategy allows investors to borrow funds based on the expected after-repair value of a property.
What is a hard money loan?
This document outlines the rights and obligations of landlords and tenants in a commercial lease agreement.
What is a commercial lease agreement or lease contract?
In real estate, this acronym stands for "annual percentage rate" and represents the true cost of borrowing money.
What is APR?
When refinancing a mortgage, this term refers to taking out a new loan that is larger than the existing loan balance and using the excess funds for other purposes.
What is cash-out refinancing?
This term describes the practice of adjusting rental rates periodically to keep up with market conditions.
What is rent escalation or rent adjustment?
This term refers to the process of estimating a property's value by comparing it to similar recently sold properties.
What is comparable sales analysis or the sales comparison approach?
This type of commercial real estate investment involves pooling money from multiple investors to collectively purchase and manage properties.
What is a real estate investment trust (REIT)?