50 Terms

Question 1

After Repair Value

Answer 1

The value of a property after repairs/ renovations have been made to force appreciation.

Question 2

Equity

Answer 2

The difference between the market value of a property and the amount owed on the property mortgage

Question 3

Cash flow

Answer 3

The amount of revenue left over after all the operating expenses and debt service are paid

Question 4

Pre- Approval

Answer 4

A home buyer who is pre approved means a lender has verified their information, checked their credit, and has approved them for a specific lo0an amount up to 90 days

Question 5

Sellers Market

Answer 5

Real Estate market where the demand for properties for sale is higher than the supply. in a sellers market, expect prices to be higher.

Question 6

Buyers Market

Answer 6

Real Estate market where the demand for properties for sale is lower than the supply. in a buyer market, expect prices to be lower.

Question 7

Appreciation

Answer 7

The increase value of property overtime

Question 8

Net Operating Income (NOI)

Answer 8

Measure a property’s profitability before adding in any cost from financing and taxes

Question 9

Debt- to - income ratio (DTI)

Answer 9

Measures the amount of debt services an individual has on a monthly basis, relative to their gross monthly income. This helps lenders evaluate how much additional debt a potential borrower can take on

Question 10

Cash on Cash Return

Answer 10

Measure the amount of annual cash flow relative to the amount of cash invested in a property investment and is calculated on a pre- tax basis.

Question 11

Cap rate

Answer 11

Measure the annual rate of return for an investment property. The higher the cap rate the better. It is calculated using the following formula: (NOI/ Market Value)

Question 12

Appraisal

Answer 12

Independent survey conducted by a lender to determine a property’s value, based on it condition and comparable listings

Question 13

Escrow

Answer 13

An account held by an independent third party to hold funds during a real estate transaction, such as earnest money, as well as to facilitate the payment of home owners insurance and taxes for a property that is financed.

Question 14

Foreclosure

Answer 14

A legal process that happens when a homeowner is unable to make a mortgage payment, usually for more than 90 days. Should the owner fail to pay off any outstanding debts on the property or sell it through a short sale, the home will be auctioned off. if its still not sold during the auction, the lender will then have control of the property

Question 15

Multiple Listing Service (MLS)

Answer 15

A date assessed accessed by licensed real estate agents to view and list properties

Question 16

Pre-Qualification

Answer 16

The first step to getting pre approved for a loan. It is meant to give a buyer an idea of how much of a loan they’ll be able to qualify for. The process is based on unverified data submitted by a consumer

Question 17

Probate

Answer 17

probate sales occur whenever a homeowner passes away without writing a will or leaving the property to someone else.

Question 18

Adjustable Rate Mortgage (ARM)

Answer 18

A homeowner has an adjustable rate-mortgage if their interest rate fluctuates at predetermined intervals through ought the course of their loan

Question 19

Debt Service Coverage Ration

DSCR

Answer 19

A measurement of the cash flow available to pay current debt service calculated using the following formula: NOI/Debt Service

Question 20

Fixed Rate Mortgage

Answer 20

A fixed- rate mortgage comes with an interest rate that remains the same throughout the duration of the loan.

Question 21

Interest

Answer 21

The cost of borrowing money over time

Question 22

Private Mortgage Insurance

PMI

Answer 22

When a buyer makes a down payment of less than 20%, they are typically required to pay private mortgage insurance. PMI is typically assessed as a percentage of the mortgage loan, and can be satisfied once for the homeowner reaches twenty percent equity (for some loans, not including FHA)

Question 23

Refinance

Answer 23

The restructuring of a home loan usually to get lower interest rate or pull equity out of a property.

Question 24

Contingencies

Answer 24

Conditions that must be met, either by the seller or the buyer, before the purchase of a property can close. Contingencies are intended to protect buyers and sellers , and often include items such as inspections. mortgage approvals and appraisals.

Question 25

Carrying Cost

Answer 25

Cost a borrower must pay while renovating a property. These are typically utilities, insurances , taxes , mortgage and other miscellaneous fees.

Question 26

Exit Strategy

Answer 26

An exit strategy is how an investor plans to cash out on an investment property. This can include strategies such as renting out a buy and hold property , wholesaling, or flipping a property

Question 27

Comparables (Comps)

Answer 27

Properties similar in bedrooms, bathrooms. amenities, sq footage, and in close proximity. Comps are used to value property.

Question 28

Loan to Value (LTV)

Answer 28

Compares the loan amount to the value of the property a buyer is purchasing

Question 29

Motivated Seller

Answer 29

An individual selling their home that has an urgent reason to sell. Investors target motivated sellers to get properties at steep discounts thus increasing potential returns.

Question 30

BRRRR

Answer 30

Stands for buy, repair, rent, refinance and use. This is strategy used to scale a portfolio quickly using the same capital over and over

Question 31

Turnkey

Answer 31

An income- producing property that is purchased without needing repairs or renovations.

Question 32

Vacancy Rate

Answer 32

The percentage of available units in a rental property, such as a hotel or apartment complex. that are vacant or unoccupied at a particular time.

Question 33

Points

Answer 33

Fees paid directly to the lender as a part of closing cost in exchange for a reduced interest rate

Question 34

Scope of work

Answer 34

Detailed description of the work to be performed by a contractor during a renovation project. it should break out pricing by material and labor.

Question 35

Hard Money Loan

Answer 35

An assets-based loan issued by private investors or organization. They are typically quicker to fund but have higher interest rates and fees than convectional loans

Question 36

Amortization

Answer 36

Amortization is the term used for the schedule of mortgage installment payments over a period of time. In real estate, a typical buyers amortization schedule is on payment per month over 15 to 30 years.

Question 37

Off- Market Property

Answer 37

A property that is not listed on MLS.

Question 38

Earnest Money Deposit (EMD)

Answer 38

The deposit put down by a buyer once a seller accepts their offer to purchase. The seller decides how much EMD they would like.

Question 39

Real Estate Owned (REO)

Answer 39

Properties that went into foreclosure, and did not sell at an auction. REO properties are owned by a bank or other lending institutions

Question 40

Closing Cost

Answer 40

Expenses incurred by buyers and sellers to close as sale. They may include appraisals fees, taxes, loans origination fees, points, title insurance, credit report fees

Question 41

For Sale By Owner (FSBO)

Answer 41

A property that is for sale by the owner, rather than being listed by a realtor

Question 42

Lien

Answer 42

A property lien is a legal claim of property which allows the lien holder to obtain access to property if debts are not paid

Question 43

Commission

Answer 43

The money paid to realtors once a transaction closes. The typical commission for both buyers and sellers agents are about 6% which is split by both agents

Question 44

Owners finance

Answer 44

An alternative mean of financing property where the seller holds the note and allows the buyers to pay them back over a period of time.

Question 45

Quit Claim Deed

Answer 45

A deed that changes hands, from one person to another, but when there is no money involved. The residence in question hasn’t been sold. Rather, the owner simply decides to transfer the deed to the second party

Question 46

Under Contract

Answer 46

Means the buyer and seller have reached an agreement and have both signed a purchase agreement.

Question 47

FHA Loan

Answer 47

A mortgage loan insured by the Federal Housing Administration that is designed to low-to-moderate income borrowers and required lower minimum down payments and credit scores compared to other conventional loans.

Question 48

Capital Expenditures (CapEx)

Answer 48

Large items that need to be replaced every so often, but not every month or year. I.e roofs, appliances, driveways, plumbing systems, or any other large items you should budget for but that do not occur enough to be easily accounted for.

Question 49

As-is

Answer 49

Indicates that the buyer must be willing to accept the home exactly as it currently is, foregoing any opportunity to request that the seller makes repairs or offers credits for problems with the property.

Question 50

Title Insurance

Answer 50

Protects buyers and lenders against defects or problems with a property’s title when there is a transfer or property ownership.