Beginner Real Estate Terms You Must Know!

This list covers some of the basic and more advanced vocabulary, acronyms, and definitions you will need to understand to become a successful real estate investor. To have informed conversations with other professionals and investors, and to build confidence in your investing journey.

1. REI- Real estate investing. The entire business of real estate investing, often referred to as REI online.
2. Buy and Hold- Buying or investing in rental properties with the plans to hold the asset for a fixed or indefinite period of time.
3. Flips- Buying and selling a property, most often that needs renovation before selling. This could refer to flipping contracts (wholesaling), or just buying and selling at a higher price (wholetailing).
4. LTR- Long term rental, traditional buy and hold rental properties with 1+ year leased tenants.
5. STR- Short term rental, typically for tenants of less than 1 year, this would include vacation rentals, travel nurses, AirBnb, etc.
6. STR Arbitrage- An investor who leases a unit or building, from the legal owner at a set price, and then leases that same unit or property to STR rentals to create a profit margin.
7. SFR- Traditional single family rental property.
8. MFR- Multifamly rental properties 2 or more units.
9. Commercial- Often used to define residential multifamily of 5+ units, or other non residential real estate, such as industrial building, office, or retail properties.
10. Retail- Often used for storefronts, businesses, or shops that lease or own real estate from investors. It also refers to traditional owner occupied home buyers/sellers as the retail market, meaning non investors.
11. Residential- Any real estate that allows for residential occupants, non commercial, or less than 5 multifamily units.
12. Note- Any promissory note, mortgage, or loan recorded against a real estate property.
13. Bank/Credit Union/Brokers- A bank is a local, regional or national bank that lets you maintain a checking account, or issues mortgages and other loans. A credit union is owned by its members, and operates similar to a bank, typically with lower fees and often better loan terms. A broker will help find, negotiate, and close loans with other lenders on your behalf.
14. Private Lender- An individual who loans money to buy or real estate for a set period of time and set terms. Typically lower fees, and interest rates than Hard Money lenders.
15. Hard Money Lender- A company that lends money to real estate investors usually within a few weeks, for a set period of time, with higher fees, and rates than a private money lender.
16. Agency Debt- Debt offered typically by fannie mae, or freddie mac for larger multifamily properties with over 1MM in loan amounts.
17. Debt Vs. Equity Partners- A debt partnership will be paid an interest rate during or after a deal is completed as agreed up before entering the partnership. An equity partnership will be rewarded with ownership, and equity paid out of the deal via cash flow, or profits upon sale or refinancing.
18. Syndications- A term used to describe an SEC regulated partnership in which general partners raise capital from limited partners to buy larger real estate properties in most cases.
19. APR- Annual percentage rate of interest, typically expressed in loans, and mortgages.
20. ARM- Adjustable rate mortgage, often used in commercial mortgages, where you have a set period of time for a fixed interest rate, after which it usually adjusts annually.
21. Balloon Period/Payment- A set amount of time in which to pay off a debt, often used in commercial mortgages as a deadline to pay off the loan in full by selling the property or refinancing.
22. Amortization- The timeline and ratio in which a mortgage or loan will be paid in full, and how much of each payment will be applied to interest and principal during that timeline.
23. Underwriting- The process of checking all of the factors of a real estate deal to determine profitability and potential risks to determine if you want to proceed with an offer or purchase of a property. Evaluating the possible income and expenses to determine a net operating income.
24. Due Diligence- The process of checking documents, and physical inspections of a property or deal to determine if the information you have or need is accurate and correct. This is the time period in the buying process you will look for physical defects or other issues with a property or deal.
25. Income- All of the gross income from rents, laundry, or other fees.
26. Expenses- All of the costs of owning real estate, utilities, vacancy, insurance, property taxes, maintenance, and capital expenses.
27. Maintenance- Routine issues that arise on a rental property, such as clogged drains, painting, repairs, etc. Usually lower cost items.
28. Capital Expenditures- Big ticket items on investment properties that have longer useful lifes, such as roofs, windows, furnaces, plumbing, etc.
29. Cash flow- The money left over each month after all income and expenses are calculated.
30. Reserves- Capital set aside for maintenance and capital expenditures on a rental property.

Part 1 of 2, I am working on another list of terms to define! Let me know what I missed, if you agree or disagree with my definitions. I hope this helps someone who is beginning their journey in REI. 

Joseph Cornwell

Realty One Stop