50 Terms Flashcards
After Repair Value
The value of a property after repairs/ renovations have been made to force appreciation.
Equity
The difference between the market value of a property and the amount owed on the property mortgage
Cash flow
The amount of revenue left over after all the operating expenses and debt service are paid
Pre- Approval
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
Sellers Market
Real Estate market where the demand for properties for sale is higher than the supply. in a sellers market, expect prices to be higher.
Buyers Market
Real Estate market where the demand for properties for sale is lower than the supply. in a buyer market, expect prices to be lower.
Appreciation
The increase value of property overtime
Net Operating Income (NOI)
Measure a property’s profitability before adding in any cost from financing and taxes
Debt- to - income ratio (DTI)
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
Cash on Cash Return
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.
Cap rate
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)
Appraisal
Independent survey conducted by a lender to determine a property’s value, based on it condition and comparable listings
Escrow
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.
Foreclosure
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
Multiple Listing Service (MLS)
A date assessed accessed by licensed real estate agents to view and list properties
Pre-Qualification
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
Probate
probate sales occur whenever a homeowner passes away without writing a will or leaving the property to someone else.
Adjustable Rate Mortgage (ARM)
A homeowner has an adjustable rate-mortgage if their interest rate fluctuates at predetermined intervals through ought the course of their loan
Debt Service Coverage Ration
DSCR
A measurement of the cash flow available to pay current debt service calculated using the following formula: NOI/Debt Service
Fixed Rate Mortgage
A fixed- rate mortgage comes with an interest rate that remains the same throughout the duration of the loan.
Interest
The cost of borrowing money over time
Private Mortgage Insurance
PMI
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)
Refinance
The restructuring of a home loan usually to get lower interest rate or pull equity out of a property.
Contingencies
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.
Carrying Cost
Cost a borrower must pay while renovating a property. These are typically utilities, insurances , taxes , mortgage and other miscellaneous fees.
Exit Strategy
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
Comparables (Comps)
Properties similar in bedrooms, bathrooms. amenities, sq footage, and in close proximity. Comps are used to value property.
Loan to Value (LTV)
Compares the loan amount to the value of the property a buyer is purchasing
Motivated Seller
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.
BRRRR
Stands for buy, repair, rent, refinance and use. This is strategy used to scale a portfolio quickly using the same capital over and over
Turnkey
An income- producing property that is purchased without needing repairs or renovations.
Vacancy Rate
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.
Points
Fees paid directly to the lender as a part of closing cost in exchange for a reduced interest rate
Scope of work
Detailed description of the work to be performed by a contractor during a renovation project. it should break out pricing by material and labor.
Hard Money Loan
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
Amortization
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.
Off- Market Property
A property that is not listed on MLS.
Earnest Money Deposit (EMD)
The deposit put down by a buyer once a seller accepts their offer to purchase. The seller decides how much EMD they would like.
Real Estate Owned (REO)
Properties that went into foreclosure, and did not sell at an auction. REO properties are owned by a bank or other lending institutions
Closing Cost
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
For Sale By Owner (FSBO)
A property that is for sale by the owner, rather than being listed by a realtor
Lien
A property lien is a legal claim of property which allows the lien holder to obtain access to property if debts are not paid
Commission
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
Owners finance
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.
Quit Claim Deed
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
Under Contract
Means the buyer and seller have reached an agreement and have both signed a purchase agreement.
FHA Loan
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.
Capital Expenditures (CapEx)
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.
As-is
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.
Title Insurance
Protects buyers and lenders against defects or problems with a property’s title when there is a transfer or property ownership.
