Real Estate Glossary
A comprehensive reference of real estate terms, definitions, and examples.
A
ADR
Average Daily Rate — the average price per booked night for a short-term rental.
Example: $6,000 revenue / 30 booked nights = $200 ADR.
Why it matters: ADR directly impacts revenue. Higher ADR with stable occupancy means higher income.
Amortization
The gradual repayment of a loan through scheduled payments of principal and interest.
Example: A 30-year amortized loan slowly shifts from mostly interest to mostly principal over time.
Why it matters: Understanding amortization shows how much equity you build with each payment.
Appreciation
The increase in a property's value over time.
Example: A $250K property growing 4% annually is worth $304K in 5 years.
Why it matters: Appreciation builds wealth passively and increases borrowing power.
B
Bridge Loan
Short-term financing used to bridge between purchase and permanent financing.
Example: Using a bridge loan to acquire a property quickly before refinancing into a DSCR loan.
Why it matters: Bridge loans enable fast acquisitions in competitive markets.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat — a strategy to recycle capital.
Example: Buy for $150K, rehab $30K, appraise at $220K, refinance and pull cash out for the next deal.
Why it matters: BRRRR lets you scale quickly by reusing your initial investment.
C
Cap Rate
NOI divided by purchase price — measures return without financing.
Example: $24,000 NOI / $300,000 price = 8% cap rate.
Why it matters: Useful for comparing properties and markets on an apples-to-apples basis.
Cash Flow
Net income after all expenses and debt service.
Example: $2,500 rent - $1,800 expenses = $700/month cash flow.
Why it matters: Cash flow is the primary reason to invest in rental real estate.
Cash-on-Cash Return
Annual cash flow divided by total cash invested.
Example: $8,400 annual cash flow / $60,000 invested = 14% CoC return.
Why it matters: Measures the actual return on your cash, accounting for leverage.
Closing Costs
Fees and expenses paid at the completion of a real estate transaction.
Example: Title insurance, appraisal, attorney fees, recording fees — typically 2-5% of purchase price.
Why it matters: Closing costs add to your total investment and affect cash-on-cash return.
Conventional Loan
Standard mortgage not backed by a government agency.
Example: A 30-year fixed loan at 7% with 20% down on an investment property.
Why it matters: Most common financing tool. Requires strong personal income and credit.
D
Debt Service
Total annual loan payments (principal + interest).
Example: $1,500/month mortgage = $18,000 annual debt service.
Why it matters: Debt service is subtracted from NOI to determine cash flow.
DSCR
Debt Service Coverage Ratio — NOI divided by debt service.
Example: $24,000 NOI / $18,000 debt = 1.33 DSCR.
Why it matters: Lenders use DSCR to evaluate if a property can cover its debt. Target 1.25+.
Due Diligence
The investigation and analysis period before completing a purchase.
Example: Inspecting the property, reviewing financials, checking title, and assessing the market.
Why it matters: Thorough due diligence prevents costly mistakes and surprises.
E
Equity
The difference between property value and amount owed.
Example: $300K value - $200K mortgage = $100K equity.
Why it matters: Equity is your ownership stake and grows through paydown and appreciation.
F
FHA Loan
Government-backed loan with low down payment requirements.
Example: 3.5% down on a fourplex that you live in — one of the best entry strategies.
Why it matters: FHA loans make real estate investing accessible with minimal upfront capital.
Forced Appreciation
Increasing a property's value through improvements and better management.
Example: Renovating units and raising rents from $800 to $1,100 increases the property's NOI and value.
Why it matters: Forced appreciation is one of the most powerful tools in real estate investing.
G
Gross Rent
Total rental income before any expenses are deducted.
Example: A fourplex with four units at $1,000 each = $4,000/month gross rent.
Why it matters: Gross rent is the starting point for all deal analysis.
H
Hard Money
Short-term, asset-based loans with higher interest rates.
Example: A 12-month loan at 12% interest used to quickly acquire and rehab a property.
Why it matters: Hard money enables fast acquisitions and rehab projects but is expensive long-term.
HELOC
Home Equity Line of Credit — borrow against your home equity.
Example: Using a $50K HELOC as a down payment on a new investment property.
Why it matters: HELOCs unlock trapped equity for reinvestment without selling.
I
Insurance
Coverage that protects against property damage, liability, and loss of income.
Example: Landlord insurance covers the structure, liability, and lost rental income during repairs.
Why it matters: Insurance is a mandatory operating expense that can significantly vary by market.
L
Leverage
Using borrowed money to control a larger asset.
Example: $50K down on a $250K property = 5:1 leverage.
Why it matters: Leverage amplifies returns but also amplifies risk. Use strategically.
Loan-to-Value
The ratio of the loan amount to the property's appraised value.
Example: $200K loan on a $250K property = 80% LTV.
Why it matters: LTV affects loan terms, interest rates, and whether mortgage insurance is required.
M
Mid-Term Rental
Rentals of 30+ days, often for traveling professionals or corporate housing.
Example: A furnished apartment rented to a traveling nurse at $2,500/month for 3 months.
Why it matters: Mid-term rentals bridge the gap between STR revenue and LTR stability.
Mortgage
A loan used to purchase real estate, secured by the property itself.
Example: A 30-year fixed mortgage at 7% on a $300K property with 20% down.
Why it matters: Mortgages make real estate accessible and leverage possible.
N
NOI
Net Operating Income — gross income minus operating expenses.
Example: $48K gross income - $18K expenses = $30K NOI.
Why it matters: NOI is the foundational metric for evaluating any income-producing property.
O
Operating Expenses
All costs to operate a property, excluding debt service.
Example: Taxes, insurance, maintenance, management, utilities, and reserves.
Why it matters: Accurately estimating expenses is critical to realistic deal analysis.
P
Portfolio Loan
A loan held by the originating bank, not sold to secondary markets.
Example: A local bank finances 5 properties under one portfolio loan with custom terms.
Why it matters: Portfolio loans offer flexibility for investors who don't fit traditional lending boxes.
Private Money
Loans from individual investors rather than institutions.
Example: An investor lends you $100K at 8% for 2 years, secured by the property.
Why it matters: Private money relationships can fund deals that banks won't.
Property Management
Professional management of rental properties on behalf of the owner.
Example: A PM company handles tenants, maintenance, and accounting for 8-10% of gross rent.
Why it matters: Good management preserves value and enables passive portfolio growth.
R
Refinance
Replacing an existing loan with a new one, typically with better terms.
Example: Refinancing from a hard money loan at 12% to a DSCR loan at 7.5%.
Why it matters: Refinancing can reduce payments, access equity, and improve cash flow.
Rent Roll
A document listing all units, current rents, lease terms, and tenant info.
Example: A 10-unit apartment building's rent roll shows each unit's rent, lease dates, and tenant names.
Why it matters: The rent roll is the starting point for analyzing any multifamily property.
Reserves
Cash set aside for unexpected expenses, vacancies, and capital expenditures.
Example: Maintaining 3-6 months of operating expenses per property in liquid savings.
Why it matters: Reserves prevent forced sales during tough times and keep properties operating smoothly.
RevPAR
Revenue Per Available Room — total revenue divided by available nights.
Example: $4,200 / 30 nights = $140 RevPAR.
Why it matters: RevPAR combines occupancy and ADR into one comprehensive performance metric.
S
Seller Financing
The property seller acts as the lender.
Example: A seller carries $200K at 6% over 20 years — no bank involved.
Why it matters: Seller financing unlocks deals that don't work with traditional bank lending.
Short-Term Rental
A property rented for less than 30 days at a time.
Example: A beach house earning $200/night on Airbnb with 70% occupancy.
Why it matters: STRs can generate 2-3x the revenue of long-term rentals in the right markets.
T
Tenant
A person who rents and occupies a property.
Example: A tenant signs a 12-month lease and pays $1,200/month in rent.
Why it matters: Good tenants are the foundation of stable rental income.
V
Vacancy
The period when a rental unit is unoccupied and not generating income.
Example: A unit vacant for 2 months out of 12 = 16.7% vacancy rate.
Why it matters: Vacancy directly reduces income. Budget 5-10% for long-term rentals.
VA Loan
Zero down payment loan for eligible veterans and active military.
Example: A veteran buys a triplex with 0% down, lives in one unit, and rents the other two.
Why it matters: VA loans are arguably the best financing tool available in real estate.