Knowing The Lingo

As an investor, new or experienced, you probably have a time or two heard a conversation and thought ” what is that?’ It could be that the risk of embarrassment has kept you from asking? We know there is a lot of lingo out there. Heck some real estate gurus even come up with their own terms. Where to start? Cap what? It can be overwhelming. So here we are to help. In today’s blog post, we’re going to go over some of the most common investing in real estate lingo and explain it in terms that KanKim could even understand. You know they are flipping houses now right?

MORTGAGE BROKER

Like any broker, they are the middle man. There is the lender, the borrower, and sometimes the Mortgage brokers. They do the grunt work: gathering paperwork, documenting everything – and then passing it along to a lender who makes the final yes or no decision.

INCOME PROPERTY MORTGAGE

This is a loan given to real estate investors for both residential and commercial properties that are bought with the intent to rent them thus creating income from the rent. Income property mortgages are a bit trickier to qualify for as lenders need more facts and not every lender does them.

CAP RATE

Also known as the capitalization rate. This just refers to your annual rate of return on a real estate investment property based on the expected income that the property will generate. Be sure to use our Property Repair Estimate Sheet from the get go to start your numbers off right!

CAPPED RATE

Not to be confused with the above Cap rate. We thought we would cover this too since there is some confusion. A capped rate is an interest rate that has some leeway. In other words it can vary. Good news is it can not go past a set capped rate agreed upon in advance.

CASH EQUITY

Cash is king! This is what you have in liquid assets to put down on the property. In other words the amount of money you have to invest in a property you purchase

ALL-CASH DEAL

No banks needed, so no financing needed. Perhaps the easiest transaction as there is no mortgage needed. Just a switching of deeds!

CASH-ON-CASH RETURN

Some may refer to this as your equity divided rate. What will be your ROI on this property? That’s what the cash-on-cash return is all about.

ABSOLUTE TITLE

Absolute. Final. The End. What this means is that the title to a property is now free and clear of any deficiencies or problems that could bother the owner. The owner of the perfect, or absolute, title can not be challenged and has unequivocal rights to their property. No liens. No Judgements. No attachments.

TENANCY AT WILL

A tenancy agreement where a tenant occupies property with the consent of the owner, but without an agreement that specifies a definite rental period or the regular payment of rent.Tenancy at will is also known as estate at will.

These are just some of the more common terms that you may hear out there. Remember we are here to help. Be sure to educate yourself. Our Flipping Houses University is a great start. Don’t forget to surround yourself with people that have that investor mindset, and connect with a good mentor too. Leave a comment if you have any questions!

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Erik Hitzelberger has been Real Estate Investor since 2007. While learning the ropes in the market down-cycle, he now teaches others how to use his systems and leverage other people’s expertise to achieve their own goals.

Erik Hitzelberger – who has written 185 posts on Part Time REI.