REAL ESTATE LINGO AND JARGON
Purchase and immediate resale of property within hours or days at a quick profit. Often has a negative connotation.
One who contracts to supply specific goods or services generally in connection with development of a property.
In construction, the act of predicting the total costs of labor, materials, capital, and professional fees required to construct a proposed project.
In finance, the availability of money.
The attractiveness of a house or other land improvements as viewed from the street.
An itemized list of expected income and expenses prepared weekly, monthly, or annually.
Regulations established by local governments describing the minimum structural requirement for buildings includes foundation, roofing, plumbing, electrical, and other specifications for safety and sanitation.
Permission granted by a local government to build a specific structure or reconfigure an existing building at a particular site.
A situation where buyers have a wide choice of properties and may negotiate lower prices. Often caused by overbuilding, local population decreases, or economic slump.
The physical property; often contrasted with intangibles, sometimes contrasted with cyberspace.
Without guarantees as to condition, as in sale. Premises accepted by a buyer or tenant as they are, including physical defects.
The amount someone offers to pay.
An estimate or opinion of property in its current state, which may be in disrepair or scheduled for improvement.
The public sale of a mortgaged property following foreclosure of the loan secured by that property.
An accounting of funds from a real estate sale, made to both the seller and the byer separately. Most states require a broker to furnish accurate closing statements to all parties of the transaction.
One in the business of examining Title to Real Estate and/or issuing title insurance.
The act of transferring ownership of a property from seller to buyer in accordance with a sales contract.
Two dwelling units under one roof.
Acquisition without financing; buyer pays all cash.
A subjective division of buildings by desirability among tenants and investors. Criteria include age, location, construction quality, attractiveness of style, level of maintenance, and so on. The class may be based on standards for market acceptance or the type of construction materials used. Classes based on market acceptance are not equivalent to those based on construction materials.
Evidence that the owner of land is in lawful possession thereof; evidence of ownership.
A written document, properly signed and delivered, that gives TITLE to real property.
Money paid in good faith to assume performance of a contract. If the person who put up the deposit fails to perform, the deposit is forfeited, unless conditions in the contract allow a refund.
Borrowing money to buy property.
- Obtaining a mortgage loan on a purchase.
- Assumptions of a mortgage from as seller.
- Arranging for the seller to take a loan as part of the purchase price.
- Arranging an installment sale.
A professional opinion or estimate of the value of the property. Also, the act or process of estimating value.
A general term applied to public and private sector efforts to help low and moderate income people purchase homes. Usually the programs offer lower cash down payments, eased loan qualifying rules, and/or below market interest rates.
A licensed real estate broker or salesperson.
The amount of money left for the investor after all obligations of the transaction and after personal income taxes on the transaction.
A development in which a developer completes the entire project on behalf of a buyer; the developer turns over the keys to the buyer at completion.
The price and all the fees required to obtain a property.
The intentional use of deception to cause another person to suffer loss.
One that owns or controls another company(ies).
A type of home equity loan that establishes an account that the borrower can draw on as desired. A maximum amount is typically placed on the outstanding debt, similar to a credit car. Interest accrues based on the amount of money actually borrowed, not the amount of the credit line. The product is intended for people who may need to access cash in the future but have no immediate need for a loan.
That which is owned for income production and capital growth potential, rather than for occupancy of use in a business or for personal pleasure or held in inventory.
Real estate is considered an illiquid investment because of the time an effort required to convert to cash.
Housing and Urban Development Department.
A loan secured by a second mortgage on one’s principal residence, generally to be used for some no- housing expenditure.
A contract in which, for a payment called Rent, the one entitled to the possession of real property (Lessor) transfers those rights to another (Lessee) for a specified period of time.
A person to whom property is rented under a lease. A tenant.
One who rents property to another under a Lease. A land-lord.
The recorded boundary of a plot of land.
In law, land and everything more or less attached to it. Ownership below to the center of the earth and above to the heavens. Distinguished from personal property.
Rehabilitate – to restore a structure to a condition of good repair.
To change the appearance and functional utility of a building. This may include painting, repairing, and replacing of fixtures and equipment.
Actual amounts collected from tenants for the use of space; does not include miscellaneous income e.g, laundry income or special fees). To avoid confusion, it is preferable to qualify rental income as actual, potential, or effective.
Property acquired by a lender through foreclosure and held in inventory.
Home heating system.
Value added to a property due to improvements as a result of work performed personally by the owner.
The rental income or expense or the net operating income expected to be reached upon completion of construction or after a major renovation.
One who performs services under contract to a general contractor.
Apartments, nursing homes, or single-family dwellings that receive a government subsidy.
In multifamily residential property, a suite of rooms making up a entrance and some methods of individuality from other units in the building or complex.
Real Estate located in an urban area, generally characterized by relatively high-density development and extensive availability of city water and sewer services.
Defined by the U.S Bureau of the Census as a community with a population of 2,500 or more.
A charge levied upon person or things by a government.
The percentage of all units or space that is unoccupied or not rented. On a pro-forma income statement projected vacant rate is used to estimate the vacancy allowance, which is deducted from potential gross income to derive effective gross income.
Estimated worth or price.
Inspection of premises by a buyer or tenant prior to closing or taking possession.
Cost to purchase the land and any existing buildings on that land.
Costs to build the property, including building permit fees, materials, labor, site preparation, infrastructure, and landscaping.
A calculation to ensure the property has enough income to cover its debt obligation based on the relationship between the net operating income (NOI) of a property to the amount of debt service the NOI must be used to pay.
Interior design, architect and engineering fees.
Cost to pay the developer for staff time and labor to complete the property, including profit for the risk taken and resources expended.
The portion of the agreed-upon developer fee that the developer is not paid as a development expense and instead remains as a loan in the rental property. The deferred developer fee may be recovered from the developer’s share of operating cash flow. Once the property is complete, the developer will receive a fraction of the cash flow over time. So, after the property pays its obligations, from the remaining funds, a portion would go to the developer.
Investing private capital to acquire or develop a multifamily property in exchange for a range of financial returns on that investment (Williams 2015). Tax credit equity is when investors provide up front capital for an affordable multifamily development in exchange for federal tax credits, paid out over 10 or 15 years. Developer equity is when a developer fronts its own capital for a return usually from the property’s cash flow (remaining funds after paying monthly debt obligations, operating costs, and other financing priorities).
Costs that occur during construction related to interest and fees on the construction loan, insurance during construction and other holding costs.
The maximum rent that can be charged to tenants in an LIHTC-assisted unit. It is limited to 30 percent of the applicable income limit less utilities.
The loan amount divided by the property’s value based on the capitalization rate and NOI.
A federal program to subsidize creation and preservation of affordable rental housing.
Additional debt common in market-rate development repaid by property cash flow after the first mortgage debt service is paid. Mezzanine debt typically has a higher interest rate and shorter repayment period than the first mortgage and usually comes from nonbank lenders with more flexibility and higher risk tolerance than banks.
Borrowing funds from a financial institution to finance a multifamily housing development. The borrower must repay the loan by a certain date, typically 30 years in the future. The borrower must also pay interest on the loan to compensate the lender. Mortgage debt typically amortizes over time, so the regular payments include both interest and principal.
Funds set aside on a regular schedule for future risks or expenses. For example, the replacement reserve covers replacement of major capital items that occur infrequently. The operating reserve would cover the property’s operating expenses if necessary because of a lower than estimated operating income one month.
Fees and expenses related to the mortgage loan and when applicable, fees related to the Low Income Housing Tax Credit.
Funding usually from state or local governments that has a below market interest rate to help close the gap for affordable housing.
All the expenses necessary to develop a multifamily property. This would be acquisition costs, construction costs, design fees, interim costs, permanent financing fees, operating and debt service reserves, developer fees, and project management fees.
Estimate of the lost revenue defines the loss to a property from units that are vacant from a tenant ending a lease or not rentable because of repairs or renovations. In underwriting terms, physical vacancy refers to a percentage of units not available, which economic vacancy refers to revenue lost due to vacancy. For simplicity, this model uses economic vacancy.
Self-directed IRAs may seem like a recent phenomenon, but they have been around since the IRA was established in 1974. Investing in alternatives to stocks, bonds, and mutual funds has always been allowed by the IRS (see IRS Publication 590). Self-Directed IRAs have not received large attention because many custodians who offer IRAs (banks and brokerage firms) typically offer traditional investments.