00 REAL ESTATE & RE INVESTING TERMS

Question 1

REAL ESTATE INVESTING

Answer 1

Involves the purchase, ownership (land Lord), management (property manager can be a VA), rental, and/or sale of real estate for profit.

Question 2

Rehab

Answer 2

repair of home but maintain the original style or design.

Question 3

Fix and Flip

Answer 3

Purchasing a distressed property (broken down homes, rotting homes, etc)

Question 4

Types of real estate:

Answer 4

1. Residential Real Estate
2. Commercial Real Estate
3. Industrial Real Estate
4. Retail Real Estate
5. Mixed Used Real Estate
6. Land Real Estate

Question 5

1. Residential Real Estate:

Answer 5

people need a place to live. Population grows. We’re gonna need more houses. There’s a lot of people competing for. If you buy it beneath the median.

Question 6

2. Commercial Real Estate:

Answer 6

any kind of real estate with a business purpose. Is riskier for a beginner. A higher price tag which means a lot more money. I’m more careful and introspective and I crunch my numbers. Ex: SM Mega Mall.

Question 7

3. Industrial Real Estate:

Answer 7

Warehouses and businesses. Often manufacturing plants or storage spaces. Industrial tends to get cheaper. Its very niche specific and specialized. Ex: McDonalds is the biggest real estate company in the world but real estate is just part of their business.

Question 8

4. Retail Real Estate:

Answer 8

Businesses that are opening to sell stuff and have customers come in or offer service. Retail is a very important kind of real estate.

Question 9

5. Mixed Used Real Estate:

Answer 9

When you have special zoning rights on a property to do multiple things in it (ex residential on the higher floors with commercial space on the ground floor).

Question 10

6. Land Real Estate:

Answer 10

Kris Krohn - not an investment. You’re buying and just hoping that it goes up in value. Because it doesn’t pay me.

Question 11

Real Estate:

Answer 11

The land and the house which both have value. The more the population increases, the more people want real estate.

Question 12

Equity:

Answer 12

Formula: The total value - What I owe = Equity (Note the value of the home increases overtime which will increase the equity. Note this is a number on a balance sheet that is a part of your net worth.

Question 13

Mortgage:

Answer 13

The bank will actually give me money. So to pay this off you pay a monthly mortgage. Ex $1000 per month over 30years.

Question 14

Down Payment:

Answer 14

But I must render a downpayment to the bank. Example 5% of price. So you have skin in the game.

Question 15

Land Lord:

Answer 15

The person who owns the house (but actually technically the bank owns the house till we are done paying it off). The owner of a rental property in this case.

Question 16

Tenant:

Answer 16

The person/s who rent your property. Hence there is now cashflow.

Question 17

Flip:

Answer 17

When you buy a property to later sell it to make a profit.

Question 18

Rental:

Answer 18

When you have property that houses tenants and brings in cashflow.

Question 19

REPSC

Answer 19

Real Estate Purchase Contract

Question 20

Home Types

Answer 20

SFH = Single Family Home; Duplex (two-door, two-family); Condo or Townhouse.

Question 21

Equity:

Answer 21

Difference between what a property is worth and how much is owed to the bank in mortgage.

Question 22

PITI:

Answer 22

Principle, Interest, Taxes & Insurance. Where your mortgage money goes.

Question 23

Buy Low/ Sell High:

Answer 23

generally means “it was worth more and I paid less. Then I paid less and sold it for more I would make money.”

Question 24

Profit margin:

Investopedia

Answer 24

is one of the commonly used profitability ratios to gauge the degree to which a company or a business activity makes money. It represents what percentage of sales has turned into profits. Simply put, the percentage figure indicates how many cents of profit the business has generated for each dollar of sale.

Question 25

Equity:

Answer 25

is ownership. In home ownership, equity refers to how much of your home you actually own-meaning how much of the principal you’ve paid off. The more equity you have the more financial flexibility you have, as you can refinance against whatever equity you have built. Put another way, equity is the difference between the fair market value of the home and the unpaid balance of the mortgage.

Question 26

Mortgage:

Answer 26

• A home mortgage is a loan given by a bank, mortgage company or other financial institution for the purchase of a residence—either a primary residence, a secondary residence, or an investment residence—in contrast to a piece of commercial or industrial property.
• Mortgages are also known as “liens against property” or “claims on property.
• With a fixed-rate mortgage, the borrower pays the same interest rate for the life of the loan.

Question 27

Subject Property:

Answer 27

Target Property or Prospect Property

Question 28

Liens:

Answer 28

a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

Question 29

Lead:

Answer 29

are brought and from the client for us to dial.

Question 30

Warm Lead:

Answer 30

(interested only) who has expressed some form of interest in your business.

Question 31

Hot Lead:

Answer 31

(motivated seller) matches your ideal client profile and has indicated they’re ready to have conversation about selling or buying.

Question 32

Home Inspection/ Assessment/ Evaluation:

Answer 32

are required once a potential buyer makes an offer. Typically, they cost a few hundred dollars. The purpose is to check that the house’s plumbing, soundation, appliances, and other features are up to code.

Question 33

Major Repair:

Answer 33

roof, plumbing, kitchen & bath, electrical HVAC system, repainting, flooring, driveway or garage.

Question 34

Minor Repair:

Answer 34

doors, windows, cabinet, holes in the wall.

Question 35

MLS:

Answer 35

stands for Multiple Listing Service or Multiple Listing System. A website where all the properties that are listed in a given city/state can be found.

Question 36

Offer:

Answer 36

A written proposal coming from the buyer to the seller; A proposal that would list down all the necessary details about Real Estate Purchase.

Question 37

ARV:

Answer 37

After Repair Value or price after the property has been repaired, rehab or fix & flip.

Question 38

CMA

Answer 38

Comparative Market Analysis: is a report on comparable homes in the area that is used to derive an accurate value for the home in question.

Question 39

Equity:

Answer 39

is ownership. In homeownership, equity refers to how much of your home you actually own-meaning how much of the principal you’ve paid off. The more equity you have the more financial flexibility you have, as you can refinance against whatever equity you have built. Put another way, equity is the difference between the fair market value of the home and the unpaid balance of the mortgage.

Question 40

Real Estate Broker:

Answer 40

is a real estate agent who has passed a state broker’s exam and met a minimum number of transactions. These brokers are able to work on their own or hire their own agents.

Question 41

Real Estate Agent VS. Investor

Answer 41

Many people do not make the distinction between Realtors and real estate investors since they both deal with real estate. However, there is a world of difference in what they do and how they operate, and it is important to understand these differences when you are selling or buying a piece of property. Let’s look at what makes them different.

Question 42

Agents need to be licensed; investors do not.

Answer 42

Real estate agents need to be licensed by the state in which they do business. Real estate investors do not need a real estate license. People always ask me if they need a real estate license to buy and sell properties. The answer is no. You only need a license if you plan to represent someone other than yourself in the purchase and sale of properties.

Question 43

Agents earn commissions; investors do not.

Answer 43

Both real estate agents and real estate investors earn money on real estate. They just do it in different ways. Agents earn 1-5% commission off every sale they facilitate. Sophisticated investors first decide how much they want to earn then find deals that meet their minimum criteria.

Question 44

Agents rely on the integrity of their brand to market; investors do not.

Answer 44

Agents and investors both invest in marketing. Agents typically have websites, business cards and do quite a bit of networking and even some direct mail campaigns. Investors are known by their simple signage. You may see handwritten yard signs in the cities that say: We buy ugly houses.

Question 45

Agents are employed by brokers; investors are not.

Answer 45

Real estate agents work under real estate brokers. Once an agent is done with school and has been licensed by the state, he or she has to find a real estate broker to call home. Investors have to make their own way. They are independent individuals who go where the deals are.

Question 46

Helping You Sell or Buying from You.

Answer 46

When you work with a real estate agent, they will help you sell your property. They will assist with the marketing, staging the home, and showing it to others for you. They strive to make the process of selling as easy as possible. However, the investors are looking to buy from people like you. The real estate agents will try to get you the highest amount possible for your home. The investors will want to negotiate with you to get the lowest possible price for the home you are selling, since they need to make a profit on it.

Question 47

How they work.

Answer 47

A Realtor works for a broker and the investors tend to work on their own or in teams/ groups. The investors do not have the same amount of regulation and oversight that the Realtors have since they are working on their own behalf.

Question 48

Realtor Investors - The Best of Both Worlds.

Answer 48

As you can see, even though they are both working with real estate, there are many differences between Realtors and investors. However, some realtors are investors too! This gives them a distinct advantage when working with sellers. Not only do they understand both the Realtor and investor side of real estate, they are able to offer sellers more options to meet their needs.

Question 49

What is WHOLESALING?

Answer 49

“Wholesaling real estate is when a real estate wholesaler puts a distressed home under contract with the intent to assign that contract to another buyer. They market the property to potential buyers for a higher price then they have the property under contract for.”