REWW’s Real Estate Investment Terms Glossary
Learn the real estate investment terms you need to know…
The better you know the lingo, the more professional you’ll sound, the better you’ll do at picking winners and avoiding pitfalls, and the more real estate investing tactics and strategies you’ll have at your disposal.
The value of a piece of real estate according to an appraisal. A variety of valuation methods may be used in this process. Including, the income approach, comparable sales approach, cost approach, fair market value, and highest and best use. In addition to traditional appraisals and drive by appraisals, AVM may be a less expensive, though less accurate alternative.
A state certified or state licensed appraiser is required for an official appraisal. County appraisers are elected officials who assess local properties for property tax purposes. Appraisal certification and licensing is one of the professional real estate disciplines and designations which require the most training and experience.
After Repair Value (ARV) is an estimate of what a property may be worth after specific improvements are made. House flippers and real estate wholesalers often use ARV to calculate their purchase offers. As do rehab lenders when determining the LTV (Loan To Value) they will lend in a particular transaction. ARV can be more accurately determined with a ‘Subject-To’ appraisal.
In a real estate purchase and sales contract, the assignment clause enables the buyer to assign their rights to purchase the property on the laid out terms to another replacement buyer. This strategy is often used in real estate wholesaling, and when speculating on new construction condos. It can also be used as an ‘escape clause’ in other contracts in case the investor cannot close in time, but can find someone else who can, or chooses to bring in a partner, or needs to change the way the property will be titled.
An acceleration clause is typically used to allow lenders to call the entire loan balance due upon a specific default. For example; the Due on Sale Clause, which dictates that the loan be paid off in full on a sale or transfer of ownership. This can also be triggered is there is fraud discovered in a loan or transaction during quality reviews.
This is built up interest which the borrower still owes. This can be found when a pay off is sought. When a borrower tries to redeem themselves in getting caught up with loan payments or in a foreclosure. And when mortgage note investors are evaluating profit potential of new assets for sale.
The county property appraiser routinely assesses all of the properties in their jurisdiction for property tax purposes. The tax assessed value times the local tax rates, minus any exemptions determine the amount of the property tax bill on a property. Some areas assess properties at very different rates. They may be close to market value, or typically a small fraction of the likely selling price.
A balloon payment is a large lump sum payment due on a mortgage loan. This happens when a mortgage loan is not fully amortizing. You may make payments on a 30 year amortization basis, but the loan maturity date maybe be in 10 or 20 years. Thus requiring a big lump sum payoff. These clauses are common in commercial mortgages, as well as second mortgage loans and home equity loans and lines of credit.
A ‘bird dog’ is effectively a property scout. Someone who goes out and finds leads on potential real estate acquisitions for another investor who has the experience or funds to complete the deal. The bird dog may be compensated with a referral fee, or on a partnership basis. This can be a highly effective and efficient way for both new and experienced investors to gain more traction, quickly. Be sure to check your local real estate laws to ensure you structure these arrangements legally.
A blanket mortgage is a type of mortgage loan which covers more than one property. For example; a portfolio of single family homes, multiple commercial buildings or the vacant lots in a new subdivision. Used by lenders when the value of a single asset does not give them the risk coverage they desire. Used by investors when they want to refinance, release capital as a bridge loan for a purchase, or to streamline financing across multiple properties.
Blended interest rate
When a borrower has more than one loan on a property at different interest rates, the ‘blended’ rate is used to describe the effective financing rate of the overall debt on the property. Often used by mortgage lenders to minimize the appearance of high second mortgage rates.
A middleman who connects two parties in a transaction. Such as a mortgage broker who connects borrowers and capital sources, or real estate brokers who connect buyers and sellers or tenants and landlords. As well as business brokers who connect buyers and business owners. A broker will typically be compensated for their work. Either via a percentage of the dollar value of the transaction, a fee, or both.
A Broker’s Price Opinion (BPO) is a form of valuation for real estate. BPOs are typically used by mortgage lenders who are trying to obtain a valuation for their assets. Often when seeking to liquidate REOs, approve short sales or sell mortgage notes. These are cheaper than full appraisals. Though may also be far less accurate as well.
A brokers’ open is a type of open house hosted specifically for licensed real estate brokers and their agents. It is a way to showcase a new listing and get other agents excited about bringing their clients to view the property. These can often be quite lavish affairs with luxury catering services.
Cash on cash returns
A cash on cash return is used to tell potential investor buyers what the real return is on their cash investment. Often used as an annual percentage rate. Can be a more accurate way to determine and compare returns between using all cash, and various levels of financial leverage.
Commercial real estate
Commercial real estate is really anything except for small residential properties. Anything more than a 4 unit home is considered commercial for real estate financing. So commercial property includes, apartment buildings, land for development, solar farms, hotels, churches, gas stations, office property, and shopping malls.
Capitalization Rate is another method for projecting and comparing the investment returns of a property. Cap rate used the Net Operating Income (NOI) of a property divided by its current market value to derive this rate of return. True returns can be quite different for different investors depending in how they structure and finance the deal. Cap rate also changes over time as property value and income changes.
Various expenses and fees required to be paid by the buyer and seller at the time of completing a transaction. The can include loan fees, recording fees, wire fees, title insurance, flood and hazard insurance premiums, prorated interest and taxes, and more. The Closing Disclosure will layout all of these costs and how much you need to bring to the closing. A good Net Sheet prepared in advance should provide a good estimate of these figures.
Cross collateralization in real estate generally happens with a blanket mortgage loan.
Capital gains tax
This is a type of tax on investments. Typically levied on large gains made on long term investments. It can be highly expensive and run into high double digit rates. Can be minimized in real estate with certain exemptions for homeowners, as well as by using 1031 like kind exchanges on investment properties.
Seller and landlord concessions are often made to buyers and tenants in the marketing and real estate negotiation process. These commonly include, months of free rent, repair costs, and seller paid closing costs. Builder upgrades may also fall into this category. Appraisers need to monitor concessions to accurately evaluate the true sales price of comparable properties. For example, if a neighboring home involved 6% seller paid closing costs, the true value of your identical property may be 6% less than the listed purchase price.
A contingency normally shows up in real estate a clause in the purchase and sales contract. It means the contract is contingent on a specific factor or performance. Sellers and their agents typically like as few contingency clauses as possible. While investor buyers like as many as possible in order to have multiple escape routes and to avoid being trapped in a deal that really doesn’t work for them. Common contingency clauses include those for financing, inspections, appraised value, repair costs, and title.
A co-op is a unique type of real estate ownership structure, in which the owners collectively own shares in a property (such as an apartment building), rather than actually taking deeded ownership in a specific unit. These structures have been quite common in markets like NYC. Yet, they can be difficult to finance as most lenders see there is no direct collateral on a specific lot or set of bricks and mortar.
Deed in lieu
A deed in lieu of foreclosure is a document and tool frequently used between mortgage lenders and borrowers, when the borrower is in default. Instead of going through the full foreclosure process, the borrower can sign over the deed and ownership to the lender in lieu of that. This can expedite the exit for the borrower and may prevent the worst damage to their credit, while saving the lender time and money.
A deficiency judgement is a legal claim that a creditor can win when the assets seized and sold to satisfy a debt do not fully cover the amount owed. For example; if a borrower owes $200,000 on a home, and the lender forces a foreclosure auction at which the property only sells for $100,000, then the lender could win a deficiency judgement for $100,000. They may be able to legally pursue the borrower for many years until they are fully repaid. Depending on the jurisdictions this could include wage garnishments, other personal property asset seizures and more. Effectively the borrower loses the property, and still owes the bank.
A dry closing means no funds are exchanged. This is in contrast to a wet closing where deeds and funds are exchanged simultaneously. This can happen with after hours closings, or when there is an outstanding underwriting condition that still needs to be satisfied before the lender will authorize the release of funds from escrow.
Over time every improvement on a property ages and decreases in value. This includes appliances, roofs, etc. Investors can use this deprecation to reclaim losses through their taxes and tax breaks. Certain types of properties may also qualify for accelerated depreciation, allowing them to take larger tax breaks in a shorter period of time.
An earnest money deposit is traditionally put up within several days of a real estate purchase and sales contract as binder and good faith payment. This money should go into escrow with an independent third party, such as a real estate attorney or title company. Contrary to popular opinion, it is not necessary to put up such a deposit to have a binding contract, even though many agents and sellers may not be used to that.
An easement is a right of use or access on a property. Most properties have some type of easement. For example, allowing utility companies access to work on lines and read meters. It can also apply to cut through access and driveways to other properties. Your title report and survey should reveal any of these attached to your property.
An encroachment is where someone is encroaching on your legal property. For example, their fence is actually on your land. If left unchecked, this portion of your property can be lost to the encroaching property and they may gain a legal easement for it.
This is the right of government to seize your real estate for other uses. They ought to provide fair compensation in exchange, though the level of how fair this is can be highly debatable. This is a common practice for seizing additional land for airports, government property, schools and colleges, and waterways. It may also be used to make way for larger commercial developers who can provide more tax revenue to local authorities than current users. It has also been tested as a way to fight back against blighted property and to take over land that may be prone to disasters. Such as prime waterfront property in the northeast.
The is the amount of positive value you have in your property. If you own a home worth $200,000, and owe $100,000. You have $100,000 in positive equity. Negative equity can become an issue when real estate values fall, or borrowers become overleveraged or mount up other debts and fines.
Think of escrow as a neutral middleman account in which funds are held. It’s like an intermediary who holds the money in a transaction until all the paperwork is complete. Earnest money deposits, repair funds, prorated taxes, insurance and association dues, and mortgage funds can be held in escrow. They are to be disbursed at closing, or afterwards.
An estoppel letter is used to accurately established the status of any debt or financial liability on a property. When acquiring a rental property with tenants, the title company should obtain an estoppel letter from the renters in order to verify the status of the lease, when rent was paid, and how much deposit money the seller needs to transfer to the new buyer on a sale.
A contract extension is used to legally extend the closing date and validity of a purchase and sales contract. For example; if the borrower’s financing does not get lined up in time, they may need to negotiate an extension. The seller is typically under no legal obligation to grant an extension. Many sellers and their agents may use this to seize any earnest money deposit in escrow and go find another buyer.
An end loan is used after a construction loan or major rehab. The initial temporary financing, is then replaced with longer term financing at better rates. This typically will not happen until a CO (Certificate of Occupancy) is received. Some hybrid loans will offer a rollover provision to automatically convert, for example a construction-perm loan.
An exclusive listing is a type of real estate listing, giving an agent or broker the exclusive right to market a property for sale. In this agreement they are also guaranteed compensation (commission) for any sales which occur, even if the buyer is brought by another agent, or the seller finds their own buyer. This is the most desirable form of listing agreement for Realtors and their brokers.
Fair market value
FMV, is a value assessed by an appraiser, estimating the most likely figure a property will sell for in the current market in an arms length transaction. This may be a combination of multiple approaches (cost, income and comparables sales), or more heavily weighted to the most applicable valuation method. FMV is still viewed as just as much an art as a science.
House flipping is the real estate investment strategy of buying low and reselling for a profit. While this term is often also used for wholesaling, true flippers also engage in fixing or making repairs and improvements. This is a strategy which can also be applied to any other type of real estate, including commercial property.
Describes the relationship and things which are owed in an agency agreement, as well as the person or entity which has a fiduciary responsibility to someone else. It effectively means having the right to confidentiality and to act in that person’s best interest. For example; an investment advisor or Realtor can be a fiduciary and may be bound to put their client’s interest above their own.
When a property owner defaults on their obligations, a foreclosure is a legal process which aims to make creditors whole again by liquidating the property or transferring possession of the collateral to the creditor. This can happen due to late mortgage payments, past due taxes, or other breaches of contract.
Fair Housing Act
This federal act protects buyers and renters from discrimination due to race, color, sex, disability, religion, family status or national origin. This applies to allowing access, advertising, and how occupants are treated.
An FHA loan is a mortgage loan made by a regular lender and insured by the Federal Housing Administration. These loans can be very desirable for home buyers due to their lax underwriting requirements, high LTVs, and low interest rates. In a default and foreclosure these properties often end up ad HUD homes.
A For Sale By Owner is when a property owner decides to market and sell their property on their own instead of going through a real estate agent. They may market with yard signs, via online marketplaces like Craigslist, or by directly reaching out to cash buyers. These can make great deals for real estate investors who don’t want to go through the MLS or Realtors.
As the name suggests, this is a partial ownership structure for holding and investing in real estate. Some of the more notorious types of fractional ownership may include timeshares, coops and condotels. However, there are newer models, offering investors an experience more like fractional ownership of jets and yachts. You own a certain percentage of the property, and are able to use it or share in the income according to that percentage of ownership.
A homestead exemption can be a very valuable tax break for homeowners. This can exempt an owner from thousands of dollars in tax assessed value and limit annual property tax increases on your primary residence in some states. Like Florida. However, it is important to note that once a property is sold, the property taxes will reset at the new current value. Make sure this doesn’t catch you off guard.
A ‘hard money’ loan has typically been used to describe an asset based loan, which requires little in the way of personal qualifications from the borrower. It is generally based on the value of the real estate, not personal credit or income. However, after 2008, many have advertised themselves as hard money lenders, while making their underwriting terms tougher than conventional lenders.
‘JV’ stands for joint venture. This is a common form of real estate partnership. A joint venture can be formed between two individual investors, corporate investors, or a lender and active investor.
In real estate ‘leverage’ typically refers to using financing to leverage existing capital (or lack of it) to acquire and control more property. Leverage can be achieved through mortgage loans, venture capital, and raising private capital through real estate partnerships. Leverage is one of the great benefits of real estate investing, allowing investors to go bigger, faster, reduce risk, and diversify.
A lease option is a form of creative real estate financing. This combines two common approaches; leasing and option contracts. This can be used to control properties sooner, for less out of pocket, and to reduce risk on the speculation of increasing values. This can be ideal for low money down real estate investing, and in tighter markets when lending is scarcer. It can also be used on a very high level for large properties and piecing together parcels for development.
LOI stands for Letter of Interest. Investors often use LOI’s to send out quick, non-binding offers. It can be used to test the seller’s willingness to accept certain contract terms and prices. This is a very short form offer, demonstrating your interest in a property. If the due diligence checks out, this can then be rolled into a formal offer and real estate purchase and sales contract. A LOI is not binding on either party. It simply says you would be interested in buying the subject property on the described terms. Using a LOI can help investors send out many offers, faster, and to operate more efficiently.
A letter of credit is similar to a proof of funds (POF), verification of deposit (VOD), or mortgage approval letter. This is traditionally issued by a bank or lender to verify they plan to, or are willing to fund a given borrower or transaction. LOCs are more common in higher end and commercial real estate transactions. A letter of credit does not guarantee funding and may not be accepted by many sellers or agents in lieu of these other items.
A lien is an encumbrance on the title of a property. Liens are effectively debt attached to a property. They will need to be paid off before title can be transferred and the title can be insured for the new buyer. Common types of liens include mortgages, property taxes, code violations and fines, mechanics liens, and HOA and condo dues. A lien search should reveal which of these are attached to a property before buying, so that the buyer and seller know how much equity is there.
A lis pendens is a publicly recorded notice of a pending lawsuit involving a piece of real estate. A lis pendens is typically filed against a property in public records when a mortgage borrower falls into default. This notice field by the lender warns potential buyers and creditors that their is a potential foreclosure lawsuit pending, which will need to be satisfied to complete a sale. Investors can use lis pendens data to pinpoint pre-foreclosure properties, and off market deals.
A mechanic’s lien is attached to a property when a contractor has done a substantial amount of work, and has not yet been paid in full. This lien on title is their insurance that they will be paid, at least before a homeowner can sell their property or refinance. Once paid, borrowers need to be sure they obtain a satisfaction and record the debt has been paid off, in order to free up their property and equity.
A loan modification is an adjustment to the rate and/or terms of an existing mortgage loan. This is in contrast to a forbearance agreement or refinance providing new financing. Loan modifications became very popular in the wake of the 2008 financial crisis. Some modifications are temporary. Others are permanent. They often reduce the interest rate or payments so that a borrower can get back on track. They may also involve the recapitalization of past due payments and interest, or even a principal balance reduction.
The Multiple Listing Service (MLS) is the Realtors property listing system. There are numerous MLS databases, organized by local county and regional Realtor association boards and MLS subscription services. When a real estate agent lists a property for sale, it is typically publicly listed and syndicated in the MLS. It is believed that the majority of properties sold in the United States each year are sold via the MLS. Nationally this data of homes listed for sale and rent can be found via Realtor.com.
A mini perm loan is a medium term financing loan. Longer than short term loans, and shorter than permanent (20 or 30 year) financing. These loans are ideal for developers and developers who are acquiring property which is not currently delivering its optimal performance. It is an in for acquiring and improving the physical real estate or management and profitability, before being able to get a better deal on longer term financing.
A Notice of Default, tells a mortgage borrower and the public that they have breached their loan contract and are in a default position. This is one of the steps to foreclosure and a foreclosure auction. NOD data can be used be real estate investors to spot potential pre-foreclosure deals and off market properties. However, be careful that you are able to legally obtain this data and market with it through the sources you are working with. There may be restrictions. For example; using credit bureau data.
A NOO is a non-owner occupied property. Also used in mortgage lending to refer to investment property loans. Lenders vary in how they see the risk in lending on NOO versus OO property, and this can change over time. Owner occupied financing can be riskier to lenders due to increased regulations. Though it has been generally believed that borrowers will choose to default on NOO loans before their personal residence.
Non recourse loan
Most traditional mortgage loans are full recourse. That means the borrower is personally liable for the debt, beyond the direct collateral the loan is made on. For example; your home is foreclosed on and it is auctioned for 50 cents on the dollar, the lender can come after your personal assets (cars, furniture, other real estate) and income to recoup the rest. A non-recourse loan limits the borrowers’ exposure and liability to the subject property. If you don’t pay the mortgage, it can be foreclosed on, but you cannot be personally pursued for any deficiency in debt owed. There may be exceptions if the borrower has committed fraud or was blatantly negligent in preserving the property.
Off market property
Off market properties are highly desirable to real estate investors. This means they are not being publicly advertised for sale to others. You won’t find them for sale on the MLS. This has become more confusing in recent years, with some investors advertising ‘off market’ properties for sale. True off market properties are attractive because they are not being bid on and up by other competing investors, and don’t have Realtor commission fees tacked onto them.
An open listing is in contrast to a Realtor’s traditional exclusive listing agreement. In an open listing agreement, a property seller can typically continue to market and sell the property themselves or through other agents, without paying the contracted agent a commission. A Realtor is only due a commission in an open listing if they bring the buyer. In an exclusive listing, a Realtor commission is due no matter who brings the buyer.
Points refer percentage points of a loan amount in mortgage lending. These points are paid to the lender as a fee. Often used to reduce the interest rate paid, and to ensure the lender or loan officer earns their minimum desired amount for making the loan. For example; 2 points on a $100,000 loan would be $2,000. Borrowers can often negotiate more or less points to reduce upfront closing costs or reduce payments and over the life of the loan.
A pocket listing is a type of real estate listing. Rather than publicly listing and marketing a property for sale on the MLS, some Realtors will keep their listings private and only introduce them to certain buyers. They often due this to ensure they get paid twice on the transaction (buyer and seller side commission). This may not be in the sellers’ best interest. Find these deals by building relationships with Realtors.
A prepayment penalty is another way that lenders ensure they are making their desired amount of profit on making a real estate loan. If you pay off your loan before the end maturity date, you may incur a prepayment penalty. In residential lending this may be within 1-5 years of taking out the loan. It is usually a percentage of the loan amount. In commercial lending this can be a very complex calculation and may involve a portion of the equity in the property. Be sure to read and understand the fine print. Or you could discover a six figure penalty being taken out of your proceeds at closing.
This is a document in which the borrower promises to pay back the lender. A mortgage is technically a separate document placing a lien on a property, as collateral in tandem with the promissory note.
Quit claim deed
A quit claim deed is a legal document which is can be used to transfer ownership rights of a property to another person or entity. Be careful. This type of deed is not a guarantee of absolute ownership. The person signing over a quit claim deed is only saying that if they have any ownership rights, they are giving them away. It does not guarantee they own the property or have any rights to sell it.
A Real Estate Investment Trust (REIT) is a vehicle for investing in real estate. REITs can be publicly traded or private. They are differentiated by having at least 100 members, distributing 90% of their income, and having limits on how many people can control a majority interest in the REIT.
Real Estate Owned (REO) is generally used to describe properties which have been taken back by lenders after a default by the borrower. Also known as bank owned properties, or OREO. There is no guarantee that these properties will be a better deal than any others. Though creditors with real estate they have repossessed can be highly motivated to liquidate them and recoup money loaned.
A Realtor is a licensed real estate agent or broker who has become a member of a local board of Realtors, state association or National Association of Realtors. Not all real estate agents are Realtors. Realtors choose to pay dues to an association and pledge to adhere to their code of ethics. Often as part of joining a brokerage and gaining access to the MLS.
A restrictive covenant can limit what an owner can do with a property. This may apply to if they can lease a property, who to, and when. It may limit how they can use their property and what they can build on it or not. It may even limit who they can sell a property too, and when they are allowed to sell.
A reverse mortgage pays an owner, instead of them having to make monthly payments. A lender will give the owner a lump sum, monthly payouts, or a combination of both, in exchange for equity and a lien on the property. This is ideal for senior homeowners and retirees who want passive income from their property. There are certain age and equity restrictions to these mortgage loans. They can be powerful financial tools. Though they can also be detrimental if you live longer than expected.
Real estate related documents are recorded in public record to make them official, give notice to others, and provide a papertrail. Examples of this are lis pendens, mortgage liens, and transfers of ownership. If you are in private lending, buy a property or are doing lease options, you want to ensure documents are recorded to protect you.
A release clause is most common and needed when using blanket mortgage loans or cross collateralization. If you have a loan covering more than one property, the release clause will ensure you can payoff and sell off individual properties, and will spell out the requirements to do so. Common when financing a portfolio of single family homes in one loan, developing a new project, or commercial lending.
Satisfaction of mortgag
The satisfaction of mortgage is a document required to show a loan is paid in full. This enables the title company to complete the transaction and ensure you are buying a property free of any previous mortgage loans and liens.
In leasing, a security deposit is often collected to help reduce the risk of the landlord. Different jurisdictions have differing laws on maximum deposit amounts, and how it needs to be held. Be alert to the fact that this money should be held onto for the tenant or next buyer, and is not money you can spend as the landlord. There are also very specific laws for what can be deducted from the deposit on the end of a lease, how much, and how fast the deposit needs to be returned. Be very careful, as there can be big penalties for messing up here. Many times a security deposit can be more of a liability for owners than a protection.
A common term in appraisals and real estate contracts. A subject to appraisal estimates a value subject to certain improvements being made. Buying a property subject to existing financing, means the seller won’t pay off any debt, and the buyer will take the property as-is, including those debts on the property.
A survey lays out the boundaries of a property, any encroachments and easements others have, and often accompanies the elevation certificate showing flood levels and requirements for flood insurance.
Seller financing can take many forms. This includes owner financed mortgages, lease options, and rent to own deals. Seller financing can be very advantageous to both the seller and buyer, providing the terms make sense, are competitive and are aligned with the local buyer pool and direction of the market.
A short sale refers to a lender approving the sale of a property for less than is owed. A common type of sale in distressed markets and recessionary periods. For example, a property declines in value to $100,000, though the seller still owes $120,000 on the mortgage. A lender may approve a short sale for $100,000 to avoid losing more money and the costs of foreclosure.
Self-directed IRAs (SDIRA) have become powerful tools for investing in real estate, while retaining all of the tax benefits of an IRA. Can also be referred to as Solo 401ks, real estate IRAs, IRA LLCs, and checkbook IRAs. These vehicles can be used to invest in private mortgages, rental property, fix and flips, commercial real estate, private partnerships and property rights.
SFR stands for Single Family Residence.
A tax lien is placed on a property when an owner becomes delinquent on their property taxes. These liens are typically publicly auctioned off to private investors online and at local courthouses. If the owner does not pay on time, the lien holder can move to take title of the property. Many have lost their homes for pennies on the dollar due to this process and not paying annual property taxes.
Transactional funding is a form of real estate financing. It is specifically designed for real estate wholesalers (and sometimes house flippers). Transactional funding loans are extremely short term. As long as 30 days, but often just for 3 days or a matter of hours. They facilitate fast back to back closings to protect the privacy of wholesalers and preserve their earnings. Often often 100% financing, including closing costs, with no credit check or appraisal.
Title insurance insures the ownership rights to a property and provides legal protection against any adverse claims to those rights. This is issued by a title insurance company, who also typically manages the real estate closing. Title insurance is typically mandatory when a mortgage loan is involved. It is smart for everyone to get on every transaction.
Turnkey property most often refers to turnkey rental properties today. These are properties that investors can buy, and normally include renovations and renting, so that all the buyer has to do is sit back and collect passive income checks from the property management company.
Triple net lease
A triple net lease is very common in commercial real estate leasing. Also written as NNN. A triple net lease tenant pays their share of property taxes, insurance and building maintenance for the entire property in addition to regular rent and utilities. This protects the landlord from being hit by inflation. A highly desirable way to lease if you have commercial real estate.
This is the percentage of vacant units. Buildings, communities and cities have vacancy rates. All investors should count an estimated vacancy rate when projecting numbers before a purchase.
Wrap around mortgage
A wrap around mortgage is one which encompasses existing financing on a property without paying it off. One, two or more existing loans can be wrapped into a new loan to a buyer, without paying off old financing. Used for seller financing to make it easier for new buyers to come in.