A

• Absorption Rate: A metric used to evaluate the rate at which available properties in a specific market are sold over a given time period.

• Abstract of Title: A summary of the legal history of a property, including transfers of ownership and any claims or liens.

• Acceleration Clause: A provision in a mortgage allowing the lender to demand full repayment if certain conditions are not met.

• Acquisition Cost: The total cost required to acquire a property, including purchase price, closing costs, and other related expenses.

• Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that changes periodically based on an index.

• Amortization: The gradual repayment of a loan over time through scheduled payments of principal and interest.

• Appraisal: An evaluation of a property’s value conducted by a licensed appraiser.

• As-Is Condition: A term indicating that a property is being sold in its current state without any warranties or repairs by the seller.

• Assessed Value: The value assigned to a property by a public tax assessor for taxation purposes.

• Assignment of Lease: The transfer of lease rights from one tenant to another.

• Auction: A public sale in which a property is sold to the highest bidder.

B

• Balloon Payment: A large, final payment due at the end of a loan term to pay off the remaining balance.

• Broker: A licensed individual or firm that facilitates real estate transactions between buyers and sellers.

• Buyer’s Agent: A real estate agent who represents the interests of the buyer in a transaction.

• Build-to-Suit: A commercial property built specifically to meet the needs of a particular tenant.

• Bridge Loan: A short-term loan used to bridge the gap between the sale of one property and the purchase of another.

• Buydown: A financing arrangement where the seller or builder pays points to reduce the buyer’s interest rate.

• Backup Offer: An offer made on a property that becomes active if the primary offer falls through.

• Beneficial Interest: The right to benefit from the income and appreciation of a property, often in a trust or joint venture agreement.

C

• Cap Rate (Capitalization Rate): A measure of an investment property’s rate of return, calculated by dividing net operating income (NOI) by purchase price.

• Cash Flow: The net income generated by a property after deducting expenses and debt payments.

• Closing Costs: Expenses incurred by buyers and sellers during the final stages of a real estate transaction.

• Comparative Market Analysis (CMA): A report comparing the prices of recently sold properties in a specific area to determine a property’s value.

• Contingency: A condition included in a purchase agreement that must be met before the sale is finalized.

• Construction Loan: A short-term loan used to finance the building of a property.

• Common Area Maintenance (CAM): Fees charged to tenants to cover the maintenance of shared spaces in commercial properties.

• Cash-on-Cash Return: A metric calculating the return on an investment property based on the cash invested.

• Co-Investment: A joint investment made by a sponsor and investors, typically in a private equity real estate deal.

• Capital Expenditure (CapEx): The funds spent by a company or property owner making major improvements or replacements that extend the life of a property or increase its value, such as roof repairs, HVAC system replacements, or renovating units. Unlike operating expenses (OpEx), which cover routine costs like maintenance and utilities, CapEx is a long-term investment in the property.

D

• Deed: A legal document that transfers property ownership from one party to another.

• Debt-to-Income Ratio (DTI): A ratio used by lenders to determine a borrower’s ability to repay a loan, calculated by dividing monthly debt payments by gross monthly income.

• Down Payment: The initial cash payment made by a buyer as part of the total purchase price.

• Due Diligence: The process of thoroughly evaluating a property before completing a transaction.

• Dual Agency: When a real estate agent or brokerage represents both the buyer and the seller in the same transaction.

• Depreciation: The reduction in a property’s value over time due to wear and tear or obsolescence.

• Debt Service Coverage Ratio (DSCR): A measure of a property’s ability to cover its debt obligations with net operating income.

• Direct Investment: The process where an individual or entity directly invests in a property, rather than through a fund or syndication.

E

• Easement: A legal right to use another person’s land for a specific purpose.

• Equity: The difference between the market value of a property and the remaining mortgage balance.

• Escrow: A neutral third party holds funds or documents during a transaction until conditions are met.

• Exclusive Listing: A property listing where only one real estate agent or broker is authorized to sell.

• Encumbrance: A claim, lien, or liability attached to a property that may affect its transferability.

• Earnest Money: A deposit made by a buyer to show serious intent to purchase a property.

• Equity Partner: An investor who provides capital to a real estate joint venture or private equity deal and shares in the profits and losses.

F

• Fair Market Value (FMV): The price a property would sell for on the open market under normal conditions.

• Fixed-Rate Mortgage: A mortgage with a consistent interest rate throughout the loan term.

• Foreclosure: The legal process where a lender takes possession of a property due to non-payment of the mortgage.

• FSBO (For Sale By Owner): A property sale conducted directly by the owner without using a real estate agent.

• Fee Simple: The highest form of property ownership, granting full rights to the owner.

• Flip: The process of buying, renovating, and selling a property for profit.

• Fund Manager: The person or entity responsible for managing a private equity or real estate fund.

G

• Gross Income: The total income generated by a property before deducting expenses.

• Guarantor: A person or entity that guarantees to repay a loan if the borrower defaults.

• Ground Lease: A long-term lease agreement allowing the tenant to use the land for construction.

• Gentrification: The process of renovating and improving a neighborhood, often leading to higher property values and displacement of lower-income residents.

• Grant Deed: A type of deed that guarantees the property has not been sold to someone else and is free of undisclosed encumbrances.

H

• Homeowners Association (HOA): An organization managing and enforcing rules for a community, funded by residents.

• Home Equity Line of Credit (HELOC): A revolving credit line secured by a property’s equity.

• HUD (Department of Housing and Urban Development): A U.S. government agency responsible for national housing policy and programs.

• Hard Money Loan: A short-term, high-interest loan typically used by real estate investors.

• Housing Ratio: A ratio comparing a borrower’s monthly housing expenses to their gross monthly income.

I

• Interest Rate: The cost of borrowing money, expressed as a percentage of the loan amount.

• Internal Rate of Return (IRR): A metric used to evaluate the profitability of an investment over time.

• Inspection: A professional evaluation of a property’s condition, typically conducted before purchase.

• Investment Property: Real estate purchased with the intent to generate income or profit.

• Income Approach: A method used to value investment properties by estimating the income they generate.

• Infill Development: Construction of new buildings on underutilized land in urban areas.

• Investor Relations: The communication and relationship management between the sponsor and investors in a real estate deal.

J

• Joint Tenancy: A form of property ownership where two or more individuals hold equal shares with rights of survivorship.

• Judgment Lien: A lien placed on a property due to a court judgment against the owner.

• Jumbo Loan: A mortgage exceeding conforming loan limits set by the Federal Housing Finance Agency (FHFA).

• Just Compensation: Compensation required by law when private property is taken for public use.

• Joint Venture (JV): A partnership between two or more parties to pool resources for a specific real estate investment or project.

K

• Key Money: A payment made to secure a lease, common in commercial real estate.

• Kick-Out Clause: A clause in a real estate contract allowing a seller to accept another offer if the buyer does not meet specific conditions.

• Knockdown Rebuild: A process of demolishing an existing structure to build a new one.

• Kitchen Work Triangle: A design principle optimizing the layout between the sink, stove, and refrigerator in a kitchen.

L

• Lease Agreement: A contract outlining terms and conditions between a landlord and tenant.

• Lien: A legal claim against a property for unpaid debts.

• Limited Partner (LP): An investor in a real estate partnership with limited liability and no management responsibilities.

• Loan-to-Value Ratio (LTV): A metric comparing the amount of a loan to the value of the property securing it.

• Land Trust: A legal arrangement in which a trustee holds property for the benefit of beneficiaries.

• Listing Agreement: A contract between a property owner and a real estate agent to sell or lease a property.

M

• Market Value: The price at which a property would sell in a competitive and open market.

• Mortgage: A loan used to finance the purchase of real estate, where the property itself serves as collateral.

• Mortgage Broker: A professional who connects borrowers with lenders to facilitate mortgage financing.

• Mortgage Rate: The interest rate charged on a mortgage loan.

• Mortgage Insurance: Insurance that protects the lender in case the borrower defaults on the mortgage.

• Mixed-Use Property: A property that combines residential, commercial, and sometimes industrial uses in one location.

• Management Fee: A fee charged by a property manager or real estate investment firm for managing a property or portfolio.

• Monetization: The process of turning a property or asset into a source of income, such as renting it out or selling it.

• Master Lease: A lease agreement where the lessee has the right to sublease the property or parts of it to other tenants.

• Market Rent: The typical rent charged for a property in a specific area or market segment.

• Maintenance Reserve: Funds set aside for repairs and maintenance of a property.

• Mezzanine Financing: A hybrid of debt and equity financing used to fund part of a project, often secured by the borrower’s equity in the property.

• Modified Gross Lease: A lease agreement where the tenant pays a portion of the operating expenses, such as utilities and maintenance, while the landlord covers some other costs.

• Move-In Condition: The condition of a property when it is ready for a new tenant or owner to occupy.

N

• Net Operating Income (NOI): The income generated by a property after subtracting operating expenses but before accounting for financing costs like mortgage payments.

• Net Lease: A lease where the tenant pays some or all of the property’s operating expenses in addition to rent.

• Negative Amortization: A situation where the loan balance increases over time because payments are less than the interest due.

• Notice of Default: A legal notice sent by a lender when a borrower has failed to meet the terms of a mortgage or loan.

• Non-Recourse Loan: A type of loan where the borrower is not personally liable for the loan repayment beyond the property’s collateral.

• NIMBY (Not In My Backyard): A term used to describe opposition to new development or projects in a local area, particularly when the development would benefit others but might cause perceived harm to the local community.

• Niche Market: A specific segment of the real estate market that caters to a unique group of buyers or tenants.

• No-Cost Refinance: A refinancing arrangement where the borrower does not pay any closing costs upfront, but those costs are typically rolled into the loan amount or added to the interest rate.

O

• Operating Expenses: Costs associated with running and maintaining a property, such as property taxes, insurance, and utilities.

• Offer Price: The price at which a buyer offers to purchase a property.

• Occupancy Rate: The percentage of a property’s rentable space that is currently leased or occupied.

• Option Agreement: A contract that grants a party the right, but not the obligation, to buy, sell, or lease a property at a set price within a specified time.

• Operating Agreement: A contract outlining the responsibilities and rights of the members of a limited liability company (LLC) or joint venture, particularly in real estate partnerships.

• Owner Financing: A type of financing where the property seller provides the loan to the buyer instead of using a traditional lender.

• Offer to Purchase: A formal document outlining the buyer’s offer to purchase a property under specific terms and conditions.

• Opportunity Zone: A designated area eligible for tax incentives aimed at promoting investment and development in economically distressed communities.

• Offering Memorandum (OM): A document used to present detailed information about an investment opportunity, including the business plan, financial projections, risks, fees, and structure. It is often distributed to potential investors in real estate syndications, joint ventures, or other private placements.

P

• Private Equity: Investment funds that are not listed on public stock exchanges, often used in real estate to fund projects or acquisitions through pooled capital from private investors.

• Private Equity Fund: A pool of capital raised from private investors to invest in real estate or other assets, usually managed by a professional fund manager.

• Partnership: A business structure where two or more individuals or entities agree to share profits, losses, and management of a real estate investment or project.

• Private Placement Memorandum (PPM): A document that provides details about a private equity or joint venture investment opportunity, including risk factors, fees, and projected returns.

• Principal: The amount of money borrowed in a loan, excluding interest and fees.

• Private Lender: A non-institutional lender who provides loans for real estate transactions, often in the form of hard money loans or private mortgages.

• Pro Forma: A financial statement or projection that estimates the future financial performance of a property or investment, often used in real estate to forecast income, expenses, and returns.

• Purchase Agreement: A legal contract between a buyer and a seller outlining the terms and conditions of a property sale.

• Preferred Return: The minimum return on investment that preferred equity investors in a real estate deal are entitled to receive before profits are shared with common equity investors.

• Passive Investment: A real estate investment where the investor is not actively involved in managing the property, typically found in syndicated deals or private equity funds.

• Permitted Use: A clause in a lease agreement that defines how a tenant is allowed to use the rented space.

• Promote: In private equity real estate deals, the sponsor’s share of profits above a certain threshold, incentivizing them to exceed performance targets.

• Purchase Price: The agreed-upon amount for which a property will be sold or purchased.

Q

• Qualified Mortgage (QM): A type of mortgage loan that meets specific regulatory standards designed to protect consumers, including requirements on debt-to-income ratio and loan features.

• Qualified Opportunity Fund (QOF): An investment fund designed to invest in opportunity zones to provide tax incentives to investors.

• Quitclaim Deed: A type of deed that transfers whatever interest the grantor has in a property, without providing warranties or guarantees of ownership.

R

• Real Estate Investment Trust (REIT): A company that owns or finances income-producing real estate and allows investors to buy shares in the company to benefit from real estate returns.

• Return on Investment (ROI): A performance metric used to evaluate the profitability of an investment, calculated by dividing net profit by the initial investment cost.

• Recession Clause: A clause in a lease agreement that allows the landlord or tenant to terminate the lease early under specified circumstances.

• Refinance: The process of replacing an existing loan with a new one, often to obtain better terms or access home equity.

• Real Property: Land and any permanent improvements attached to it, such as buildings.

• Real Estate Syndication: A partnership between multiple investors who pool their resources to invest in a property, with a sponsor or manager handling the deal.

• Risk Premium: The additional return an investor demands to compensate for the higher risk associated with an investment.

• Reit Sponsor: The entity or individual responsible for managing a Real Estate Investment Trust (REIT), including sourcing and managing the properties.

• Rent Control: Laws or regulations that limit the amount a landlord can charge for rent or how much rent can be increased over time.

• Rent Roll: A list of all tenants in a rental property, including lease terms, rental rates, and payment history.

S

• Sponsor: The individual or entity that organizes and manages a real estate investment, particularly in a syndication or private equity deal, responsible for sourcing deals, securing financing, and managing operations.

• Subordination: The process by which a lender agrees to give up its priority position in favor of another lender, usually in the context of multiple loans on the same property.

• Syndication: A process where multiple investors pool their capital to invest in a property or project, with a sponsor or general partner managing the investment.

• Sale-Leaseback: A transaction where the owner of a property sells it and then leases it back from the new owner, allowing the seller to continue using the property while accessing capital.

• Special Purpose Entity (SPE): A legal entity created to isolate financial risk, commonly used in real estate investments to hold title to properties.

• Sublease: The lease of a property by a tenant to another party, with the original tenant retaining responsibility for the lease terms.

• Standard of Care: The level of diligence and responsibility that an agent or fiduciary must exercise when managing an investment or property.

• Sponsor Fees: Compensation paid to the sponsor of a real estate syndication or private equity deal for managing the investment, typically a percentage of the deal’s profits.

T

• Tax Lien: A legal claim by the government against a property for unpaid property taxes. If the taxes are not paid, the government can sell the lien to recover the debt.

• Tenancy in Common: A form of property ownership where two or more individuals hold shares in the property, which can be unequal. Each tenant has the right to transfer their share of ownership.

• Title: A legal document that proves ownership of a property. It is important for ensuring that the property owner has legal rights to transfer or sell the property.

• Title Insurance: A policy that protects the property owner or lender against financial loss due to defects in the property’s title, such as fraud, clerical errors, or undisclosed heirs.

• Triple-Net Lease (NNN): A lease agreement where the tenant is responsible for paying the property’s operating expenses, including property taxes, insurance, and maintenance, in addition to rent.

U

• Underwriting: The process of evaluating the risk involved in lending money for a loan. Underwriters assess the borrower’s creditworthiness and the value of the property to determine the terms of the loan.

• Unimproved Land: Land that has not been developed with buildings or significant infrastructure. It is typically raw or vacant land that may need development before being used for its intended purpose.

• Use Clause: A provision in a lease that outlines the permitted uses for the rented space. It may specify certain activities that are allowed or restricted in the leased premises.

V

• Vacancy Rate: The percentage of rental units in a property or market that are currently unoccupied. A higher vacancy rate typically indicates lower demand for the property or area.

• Variable Interest Rate: An interest rate that fluctuates based on market conditions or an underlying benchmark rate, such as LIBOR (London Interbank Offered Rate). This can cause loan payments to increase or decrease over time.

• Vestibule: A small entryway or lobby area that serves as a transition between the exterior and the interior of a building. It often helps with insulation and provides space for coat racks or security features.

• Virtual Tour: A digital, 3D simulation of a property that allows potential buyers or tenants to explore the property remotely. It is often used in online marketing and real estate listings to showcase a property’s features.

W

• Walkthrough: A final inspection conducted by the buyer or tenant before closing on the property to ensure that the property is in the agreed-upon condition. It may involve checking for damage or confirming that repairs were made.

• Warranty Deed: A type of deed that guarantees the grantor (seller) holds clear title to the property and has the right to transfer ownership. It also provides a promise to defend against any legal claims against the title.

• Wraparound Mortgage: A secondary or "junior" loan that includes the balance of an existing mortgage plus an additional loan amount. The borrower makes one payment to the lender, who uses it to pay both loans, often used in situations where refinancing is not possible.

X

Y

• Yield: The income return on an investment, typically expressed as a percentage of the initial investment. In real estate, this is often calculated based on rental income and the property’s value.

• Year-Over-Year (YOY): A comparison of a specific financial metric (such as revenue, occupancy rate, or price) between one period and the same period in the previous year. It’s commonly used to analyze trends and growth in real estate markets.

• Yellow Tape: A term used to describe a property or situation that is under investigation or consideration, often used when discussing properties with legal issues or complex histories.

Z

• Zoning: Regulations imposed by local governments that determine how land can be used or developed. Zoning laws specify whether a property can be used for residential, commercial, industrial, or other purposes.

• Zoning Variance: Permission granted by a local zoning authority to deviate from the established zoning laws for a specific property. A variance allows the property owner to use the land in ways that would normally be restricted under zoning regulations.