Multifamily Investing Glossary
Here's our Glossary with basic terms in MFRE Investing. Whether you're an experienced accredited investor, or the newest newbie in the business, you have to know these terms and acronyms to become a Pro in Multifamily Real Estate!
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Acronym for All Bills Paid
Metric used to measure tenant’s demand. It shows how quickly it would take to rent or sell in a given market.
Rate to measure how long it would take to sell or rent a property. If it’s around 15%-20%, it means it has a high chance of selling or renting quickly.
The U.S. Security and Exchange Commission (SEC) defines an accredited investor as an individual (i.e., natural person) who may qualify based on wealth and income thresholds, as well as other measures of financial sophistication.
The amount of loan principal paid back in a given period.
Building with several separate dwelling units with housekeeping facilities.
Acronym for Annual Percentage Rate
The valuation of a property in today’s market.
Return from appreciation in the value of property.
Property or resource with economic value owned by individuals or organizations.
A Real Estate Asset Manager is in charge on managing their client's assets on their behalf, ensuring that the properties do not depreciate or devalue while growing their portfolio.
Provides missing financial qualifications, such as requisite net worth, liquidity, or credit score.
Legal procedure made by companies or people to declare they're unable to repay their debts to creditors to seek relief of some (or all) of their debts.
Essential sale proceeds from the exchanged property that do not go into the replacement property.
Receiving “boot” is perfectly legal, but you must pay tax on the “boot”.
Individual or firm that represents or acts as an intermediary between two or more negotiating parties.
Investment strategy that consists of buying stabilized, cash-flowing property at an attractive yield and holding for long-term as NOI growth and amortization increase your equity
Acronym for Capitalization Rate. Equivalent to the unlevered return on the property.
Acronym for Capital Expenditures. CapEx is the money spent in acquiring and maintaining the asset.
Movements of money in and out of a company.
Term that refers to the actual cash going to the investor’s bank account annually.
Allows you to tack on requests for anything else that you discover you need or forgot to request.
A legal document that provides a legal claim of a property.
Newest kind of properties, with most modern amenities and have the highest rents.
Yesterday’s Class A properties, they tend to be 5-20 years old, and sometimes they're renovated.
Properties that are 20-40 years old.
Properties nearing the end of useful life.
A particular section of a contract in a purchase or lease agreement.
Acronym for Commercial Mortgage-Backed Securities.
Acronym for Cash On Cash Return
Benefit, incentive, or discount given or received by the seller or the buyer during a transaction to help close the deal.
A clause that buyers include when making an offer on a home that allows them to back out of buying the house if the terms of the clause aren't met.
Acronym for Certificates of Occupancy.
Acronym for Commercial Real Estate. Property used for business-related purposes.
A signed legal document that transfers the ownership of a property to a new owner.missing financial qualifications, such as requisite net worth, liquidity, or credit score.
Term that refers to the decrease of the value of a property over time.
Percentage of a purchase price paid with your own money.
Acronym for Debt Service Coverage Ratio.
Period between an accepted offer and the closing. This step of the process of acquiring a property requires reviewing the contract and other legal documents, investigating the state of the property, and evaluating the risks and benefits of the property.
A third neutral party in a transaction that withholds money or documents temporarily until a particular condition has been met.
Interest earned on security deposits and not enough to affect the analysis.
Acronym for Fear Of Missing Out. Feeling of anxiety or worry that an exciting event may happen soon and will be missed.
Acronym for Gross Domestic Product. The total value of products and services made in a country in a specific period of time, typically, in a year.
Acronym for Gross Potential Rent. The maximum amount of revenue a landlord or an investor could generate from a certain property.
Acronym for High-Network Individual.
Buying an asset to obtain a certain yield (return).
Acronym for Internal rate of return. The annual rate of profit made from an investment.
A contract by which one party conveys property to another.
Process of examining all the documents related to the lease.
Debt. The percentage of capital stack comprised by the debt, as opposed to equity.
Percentage of return with a mortgage.
Acronym for Limited Liability Companies. Businesses that protect their members from the responsibility of the debts of the company.
Acronym for Letter Of Intent. A document written in a letter format expressing the intention to do a certain thing.
Acronym for Loan to Cost.
Acronym for Loan To Value. Percentage of mortgage debt in the capital stack.
The general area where the property is located. Usually, the metropolitan statistical area (MSA)
Acronym for Multifamily Real Estate. Apartments of 5 units or more are Commercial. 2, 3, and 4-family homes are residential.
Real Estate property that contains multiple units to be households.
Acronym for Triple Net Lease. A Triple Net Lease is a common type of agreement that states that the tenant of the property is responsible of all the expenses of the property.
Acronym for Net Operating Income. Net income after operating expenses, but before debt service and long-term.
Interest-only loan. Capital expenses.
Acronym for Net Present Value.
It's the value of all the future cash flows, including the positive and negative, for all the investment's lifetime.
Acronym for Operating Expenses.
Value of the sum of all returns.
Acronym for Property Condition Assessment. The lender’s engineering firm’s inspection report.
A lawsuit that hasn’t been yet resolved by a court or other authority.
Deals with special discounts and benefits.
Percentage of return with a mortgage.
Projected NOI and expenses.
Document made to outline the terms of a loan agreement to purchase a property.
Acronym for Purchase and Sale Agreement.
Acronym for Repair and Maintenance. Repainting, cleaning carpet, fixing a leak – ongoing and repeated expenses.
The value of the expenses divided by the revenues.
Investment strategy that consists in buying vacant property to fix and tenant; or rehab a property to reposition the property in the market and change the tenant base.
Acronym for Real Estate Investors.
Acronym for Real Estate Investment Trust. A REIT is a company that owns, operates or finances income-producing Real Estate investments across a range of property sectors.
A document used by investors to verify rental income generated by a commercial property.
Discounts from rent the property gave the residents. They are for staff members living on the property and enticing new tenants.
Acronym for Real Estate Owned.
Acronym for Return on Equity. This value is the percentage of return of an investor's equity in the property.
Acronym for Return on investment.
Acronym for security lawyer.
Exchanges that allow the seller of real estate to defer paying tax on depreciation recapture and capital gains.
Acronym for Single Family Rental.
In Real Estate, the term "Speculation" means buying a property because you think it will go up. Sometimes, even at negative yield.
Individual or company who finds, acquires, or manages assets for a partnership.
Area containing properties that compete.
A partnership between a group of investors to raise capital to acquire real estate properties.
Acronym for Trailing 12 . A record of the last 12 months of a property’s financial operations. A key document for receiving financials.
Acronym for Trailing 3 Months. It's the measurement of a Real Estate project's finances. Profit and Loss.
A search of the chain of title to identify any persons who have an interest in the property that would interfere with your use and enjoyment.
The process of reviewing the risk of approving a specific loan.
Structure that is used as a home, residence, or sleeping space.
Return if the purchase is 100% cash. (No mortgage)
Public services, such as telephone, gas, water, or electricity.
The rate of unoccupied units of a property.
Investment strategy that consists of buying a property with below-market rents and increasing value through management and/or capital improvements to increase NOI and asset value.
Term that refers how the owner holds title of a property.