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COMPREHENSIVE CRE GLOSSARY |GOTBIZLOANS.COM
1.
1031 Exchange: A tax-deferred exchange allowing investors to sell a property and reinvest the proceeds in a new property without paying capital gains taxes immediately.
2.
2-4 Unit Property: A residential property that contains two to four separate dwelling units, commonly used for multi-family housing, and often eligible for certain types of residential financing.
3.
30 Day Notice: A written notification typically given by a landlord or tenant to terminate a lease agreement or notify of changes, requiring the recipient to comply within 30 days.
A.
Abeyance: A state of temporary disuse or suspension, often used in legal contexts related to property rights.
Acquisition Funding: Capital used to purchase another company.
Adjusted Basis: The net cost of an asset after adjusting for various tax-related items.
After Rehab Value (ARV): The estimated market value of a property after renovations.
ALTA (American Land Title Association): A national trade association of title insurance companies, abstractors, and agents that promotes uniformity and quality in title insurance policies and procedures.
Amortization Schedule: A table detailing each loan payment's allocation between principal and interest over the loan term.
Annual Percentage Rate (APR): The annual cost of borrowing, expressed as a percentage, that includes interest rates and other fees or charges, providing a comprehensive view of the loan's total cost.
Apartment Complex: Income-producing buildings with multiple units managed by one entity.
APN (Assessor's Parcel Number): A unique number assigned by the tax assessor to a parcel of land for identification and tax purposes.
Appraisal: Professional evaluation of a property's current or post-improvement value.
Appraisal Fee: A fee charged for the professional evaluation of a property's value, typically required by lenders during the mortgage approval process to ensure the property's worth aligns with the loan amount.
Approval Letter: A letter from a lender indicating that a borrower has been approved for a loan.
ARM (Adjustable-Rate Mortgage): A mortgage with an interest rate that can change periodically based on market conditions.
Assemblage: The process of combining multiple parcels of land into a single property.
Asset: Tangible items like cars or homes used as collateral for loans.
Assumability: The ability to transfer a mortgage to another individual without changing terms.
As-Is Value: Current value of real estate at the time of appraisal.
Attorney State: A state where a licensed attorney is required to conduct real estate closings.
B.
Balance Sheet: A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.
Balloon Payment: A large payment due at the end of a loan's term after a series of smaller periodic payments.
Basis Point: One-hundredth of a percentage point, used to denote changes in interest rates or other financial percentages.
Boot: Cash or other property added to an exchange to make the value of the traded goods equal.
Borrower: An individual seeking funds for real estate ventures, agreeing to repay the loan.
BPO (Broker Price Opinion): An estimate of a property's value provided by a real estate broker.
Broker Fee: A fee paid to a broker for facilitating a loan or real estate transaction.
Bridge Loan: Short-term loan covering financial gaps between obligations in real estate transactions.
Build-to-Suit: A method of leasing property where the landlord builds to the tenant's specifications.
C.
Capital: Wealth in money or assets owned by individuals or entities.
Cap Rate Compression: A market condition where cap rates decrease, often due to increased property values or demand.
Capitalization Rate (CAP RATE): A metric used to evaluate the return on investment for real estate properties, calculated by dividing the net operating income (NOI) by the property's current market value.
Carry Cost: The ongoing expenses associated with owning and maintaining a property, including mortgage payments, property taxes, insurance, utilities, and maintenance, until the property is sold or becomes income-producing.
Cash Out Loan: A loan that allows borrowers to access cash by either increasing the principal balance of their existing loan or by creating a new loan against an asset, based on the lender's loan-to-value ratio.
Cash-Out Refi: Refinancing a mortgage to take out cash based on the property's equity.
CDO (Collateralized Debt Obligation): A complex financial product backed by a pool of loans and other assets, which is divided into tranches with varying risk levels.
CFJ (Certified Final Judgment): A final decision issued by a court that resolves the legal issues in dispute and determines the rights and obligations of the parties involved.
Charitable Remainder Trust (CRT): A trust providing income to the trustor or other beneficiaries for a period, with the remainder going to a charity, offering tax benefits and supporting charitable causes.
Cleanup: The process of removing or mitigating environmental contaminants from a property to meet regulatory standards and ensure the site is safe for its intended use. This can involve activities such as soil excavation, water treatment, and the removal of hazardous materials.
Clean Title: A title that is free of liens, encumbrances, or other legal defects, making it marketable and insurable.
Closing Costs: Fees and expenses paid at the closing of a real estate transaction, including loan origination, appraisal, and title fees.
Cloudy Title: A title that has unresolved issues, such as liens or encumbrances, which can affect ownership and transferability.
CLTV (Combined Loan-to-Value): A ratio that calculates the total amount of all loans on a property relative to its appraised value, used by lenders to assess risk in lending.
CMA (Comparative Market Analysis): An analysis of similar properties to determine a property's market value.
CMBS Loan: A loan that is securitized into a commercial mortgage-backed security.
CMO (Collateralized Mortgage Obligation): A type of mortgage-backed security that pools together mortgages and divides them into tranches with varying risk and return profiles.
Combined Loan-to-Value (CLTV): A ratio that calculates the total amount of all loans on a property relative to its appraised value, used by lenders to assess risk in lending.
Comps (Comparables): Properties with similar characteristics to the subject property, used in real estate to determine the market value by comparing recent sales or rental rates of similar properties in the same area.
Collateral: Assets pledged to a lender as loan security, often real estate.
Commercial Banking: Traditional banks offering various services, including commercial loans.
Commercial Loan Broker Engagement Fee: A fee paid to a commercial loan broker for their services in sourcing and securing a loan, paid upfront when the broker is engaged.
Commercial Loan Broker Retainer Fee: A fee paid to a commercial loan broker to retain their services, often paid upfront to ensure the broker's commitment to securing a loan.
Commercial Property Loans: Loans for commercial real estate, like offices or shopping centers.
Commercial Use/Space: Property used solely for business purposes.
Condemned: A status assigned to a property by a government authority indicating that the building is unfit for occupancy due to safety, health, or regulatory violations, often leading to required repairs, demolition, or seizure.
Condo/Townhouse: Privately owned units within a shared complex or building.
Conduit Loan: A type of CMBS loan typically used for larger commercial properties.
Confession of Judgment (COJ): A legal agreement in which a borrower acknowledges their indebtedness and consents to a judgment being entered against them without a trial in the event of a default, streamlining the process for a lender to obtain a judgment.
Construction Loans: Short-term financing for building or renovating properties.
Construction Type: Method and purpose of real estate project construction.
Conventional Loan/Lender: Standard loans from traditional banks.
Conveyance: The act of transferring property ownership from one party to another.
Corresponding Lender: A financial institution that works with a direct lender to offer loans, often handling the origination process and then selling the loans to the direct lender.
Credit Score (Credit Check): A numerical rating of creditworthiness based on credit history, calculated using the FICO scoring system with data from the three major credit agencies: Experian, Equifax, and TransUnion.
Cross-Collateralize: Using collateral from one loan to secure another loan, or using multiple properties to secure a single loan at a loan-to-value (LTV) ratio that is comfortable for the lender.
Cul de Sac: A dead-end street with a rounded end, typically used in residential areas.
D.
Debt Schedule: A table outlining a company's debt obligations over time.
Debt Service: The cash required to cover the repayment of interest and principal on a debt for a particular period.
Debt Service Coverage Ratio (DSCR): A financial metric used to evaluate a property's ability to cover its debt obligations, calculated by dividing the net operating income (NOI) by the total debt service, including principal and interest payments.
Debt Yield: A property's NOI divided by the total loan amount, used to assess the risk of a loan.
Deed in Lieu of Foreclosure: A process where a borrower voluntarily transfers property ownership to the lender to avoid foreclosure.
Deed of Trust: A document that secures a loan with real estate as collateral, involving three parties: the borrower, the lender, and a trustee.
Default: Failure to meet loan obligations over an extended period.
Deferment: A temporary postponement of loan payments agreed upon by the lender and borrower, allowing the borrower to delay payments without penalty, often used in situations of financial hardship or during specific periods such as education or military service.
Depreciation: The process by which the value of a property or asset decreases over time due to factors such as wear and tear, aging, or obsolescence, often used for accounting and tax purposes to allocate the cost of the asset over its useful life.
Depreciation Write-Off: A tax deduction that allows property owners to recover the cost of an asset over its useful life, reflecting the decrease in value of the property due to wear and tear, age, or obsolescence.
Developer: An individual or company that prepares land for construction and builds residential or commercial properties.
Development Fee: A fee paid to a developer for managing the development of a property.
Direct Lender: A lender that provides loans directly to borrowers without intermediaries.
Disclosure: The act of providing important information about a real estate transaction, including potential risks and costs.
Discount Rate: The interest rate used to discount future cash flows to their present value.
Disregarded Entity: A business entity with a single owner that is not recognized as separate from its owner for tax purposes.
Distressed Properties: Real estate in poor condition, often nearing foreclosure.
Domestication: The legal process by which a foreign judgment is recognized and enforced in another jurisdiction, allowing a creditor to pursue collection efforts across state or national boundaries.
Down Payment: The initial payment made when purchasing a property, typically a percentage of the total purchase price.
Draw Schedule: A payment plan for construction projects, where funds are released as certain milestones are met.
Debt-to-Income (DTI) Ratio: A financial metric that compares an individual's total monthly debt payments to their gross monthly income. It includes two components: front-end DTI, which measures housing-related expenses, and back-end DTI, which includes all monthly debt obligations. This ratio is used by lenders to assess a borrower's ability to manage monthly payments and repay debts.
Due Diligence: A thorough investigation of a potential investment to confirm its viability, which may include third-party reports such as appraisals, Phase 1 environmental site assessments, and inspections.
Dwelling: A place of residence.
Dynasty Trust: A long-term trust designed to pass wealth from generation to generation without incurring transfer taxes, preserving family wealth and minimizing estate taxes over multiple generations.
E.
Earnest Money: A deposit made to a seller showing the buyer's good faith in a transaction.
Embankment: A raised structure, typically made of earth or stone, built to prevent flooding or to carry a roadway or railway over low ground.
Eminent Domain: The government's right to expropriate private property for public use, with compensation to the owner.
Environmental Site Assessment (ESA): An evaluation of a property's environmental conditions and potential contamination risks.
Equity: The value of the ownership interest in a property after deducting liabilities.
Escrow Account: Third-party account managing payments per loan agreements.
Easements: Legal rights to use another person's land for a specific purpose.
Entitlement: The process of obtaining the necessary approvals for property development.
Entitled Land: Land that has received the necessary approvals for development.
Escrows: Accounts used to hold funds for specific purposes, such as property taxes and insurance premiums.
Exit Fee: A fee charged by a lender when a borrower repays a loan early or at the end of the loan term.
Exit Strategy: Plan for repaying a loan and reducing liabilities.
Extension: An agreement to extend the term of a loan or the time allowed to fulfill a contractual obligation.
Extension Fee: A fee charged by a lender to extend the term of a loan.
F.
Fee Simple: The most complete ownership interest one can have in real property, with the right to use, sell, or lease the land.
Fee Simple Absolute: The greatest possible interest in real property, giving the owner absolute ownership.
FHA Loan: A mortgage insured by the Federal Housing Administration, designed for low-to-moderate-income borrowers.
First-Lien Position: The priority status of the first mortgage recorded against a property.
Fix-and-Flip: Buying, renovating, and selling properties for profit.
Forbearance: A temporary suspension or reduction of loan payments granted by the lender to the borrower during times of financial difficulty, allowing the borrower to avoid default and catch up on payments over a specified period.
Foreclosure: The legal process where a lender takes ownership of a property due to the borrower's failure to make payments.
Foreign National: International investor involved in U.S. real estate transactions.
Front-End DTI: The percentage of a borrower's gross monthly income that goes towards housing-related expenses.
G.
GC (General Contractor): A person or company responsible for overseeing a construction project.
GP (General Partner): A partner in a partnership responsible for managing the business and liable for its debts.
Grace Period: A set period after a payment due date during which a borrower can make the payment without incurring a late fee or penalty.
Guarantor: Person responsible for loan repayment if the borrower defaults.
Guaranty: A legal promise made by a guarantor to pay a borrower's debt if the borrower defaults on a loan.
Ground Lease: A long-term lease agreement where the tenant is allowed to develop the property during the lease period, after which the land and improvements are returned to the owner.
H.
Hard Costs: Direct expenses related to construction or renovation projects.
Hard Money: Financing from non-traditional lenders for real estate investments.
Hard Money Lender: A private investor or company that provides loans based on the value of the property rather than the borrower's creditworthiness.
Hard Money Loan: Asset-based loan secured by real estate from alternative lenders.
HELOC (Home Equity Line of Credit): A line of credit secured by the borrower's home equity.
HOA (Homeowners Association): An organization in a residential community that enforces rules and manages common areas and amenities.
Holdback: Loan portion not disbursed until conditions are met.
Holding Costs: Expenses associated with property ownership over time.
Homestead: Primary residence of an individual or family.
Homestead Exemption: A legal provision that reduces the taxable value of a primary residence, thereby lowering property taxes for eligible homeowners.
Horizontal Construction: Construction of infrastructure such as roads and utilities.
HUD (Department of Housing and Urban Development): A U.S. government agency responsible for national policies and programs that address America’s housing needs, including the administration of FHA loans.
HUD-1: Document detailing financial transactions in a real estate sale.
I.
Income-Producing Property: Real estate generating rental income.
Industrial Loan: A loan used for the purchase or improvement of industrial properties.
Industrial/Warehouse: Properties used for manufacturing or storage.
Inspection: A detailed examination of a property's condition, typically performed by a qualified inspector, to identify any structural, mechanical, or safety issues that need to be addressed before completing a real estate transaction.
Interest-Only (IO) Loan: A type of loan where the borrower pays only the interest for a specified period, with principal repayments starting later, typically resulting in lower initial payments.
Interest Rate: Percentage charged by a lender for borrowing money.
Interim Financing: Short-term financing used until long-term financing can be secured.
International Investor: Foreign individual investing in real estate.
Investment Property: Real estate purchased to generate income.
Investment Rehab: Renovating a property for investment purposes.
Irrevocable Trust: A trust that cannot be modified or terminated without the beneficiary's consent, offering estate tax reduction and asset protection.
J.
Judicial State: A state where the foreclosure process must go through the court system.
Junior Debt: Debt that is subordinate to senior debt in terms of claims on assets or earnings.
K.
Kick-Out Clause: A provision in a real estate contract that allows a seller to continue marketing the property and accept another offer if the current buyer cannot meet certain conditions, typically related to selling their existing home within a specified timeframe.
L.
Land Bank: A public authority created to manage and repurpose vacant, abandoned, or foreclosed properties.
Land Contract: An agreement where the buyer makes payments to the seller in exchange for the right to occupy and use the property, but the title remains with the seller until all payments are made.
Landlocked: A property that does not have direct access to a public road.
Land Trust: A legal entity where the trustee holds title to real estate, but the beneficiary retains control, providing anonymity for the owner and simplifying property transfers without recording changes in public records.
Leasehold: A property interest where the lessee has the right to use and occupy land or buildings for a specific period under a lease agreement.
Lease Assignment: Transfer of lease payment obligations to a lender.
Legal Description: A detailed description of a property's location and boundaries.
Lien: Legal claim on property as loan security.
Liquidity:Ease of converting assets into cash.
Lis Pendens: A notice indicating that a property is subject to a pending legal action, often related to foreclosure.
Living Trust (Inter Vivos Trust): A trust created during the lifetime of the trustor to manage and protect assets, facilitating their transfer upon the trustor's death and avoiding probate.
Loan: Sum of money borrowed, to be repaid with interest.
Loan Broker: An intermediary who arranges loans between borrowers and lenders for a fee.
Loan Commitment: A lender's promise to provide a loan under specified terms.
Loan Covenant: Conditions included in a loan agreement that the borrower must comply with.
Loan Limit: Maximum amount a borrower can borrow.
Loan Mod (Loan Modification): A change made to the terms of an existing loan by the lender, often to make the loan more manageable for the borrower.
Loan Officer: A representative of a lender who helps borrowers through the loan application process.
Loan Points: Origination fee, usually a percentage of the loan amount.
Loan Stack: The layering of different types of debt and equity used to finance a property.
Loan Term: Duration and conditions of a loan.
Loan to Cost (LTC) Ratio: Comparing loan amount to construction costs.
Loan-to-Value (LTV) Ratio: Comparing loan amount to property value.
LOC as Guaranty: A letter of credit used as a guarantee, providing a financial assurance from a bank or financial institution that a buyer's payment to a seller will be received on time and for the correct amount.
LP (Limited Partner): A partner in a partnership who has limited liability and is not involved in day-to-day management.
M.
Maintenance Fee: A recurring fee for maintaining a property, including repairs and upkeep.
Maintenance Reserves: Funds set aside by property owners or managers to cover future maintenance and repair costs, ensuring the property remains in good condition and operational.
Maturity: The date on which the final payment of a loan is due.
Mechanical Lien: A security interest in a property for unpaid labor or materials used in construction or repairs.
Medical Office/Condo: Commercial property for medical offices.
Mezzanine Financing: A hybrid of debt and equity financing that gives the lender the right to convert to equity if the loan is not repaid on time.
Mixed-Use Property: Real estate with both commercial and residential units.
Mortgage: Agreement between borrower and lender for pro
perty purchase.
MTA Loan (Monthly Treasury Average Loan): A type of adjustable-rate mortgage where the interest rate is based on the monthly average yield of U.S. Treasury securities.
Mortgage Broker: Intermediary connecting borrowers and lenders.
Multi-Unit Dwelling: A property with multiple residential units, such as an apartment building.
Multi-Family Rentals: Properties with multiple residential units.
N.
Negative Amortization: A situation where loan payments are less than the interest due, causing the loan balance to increase over time.
Net-Operating-Income (NOI): Calculation measuring property profitability or in simpler terms, a measure of a property's profitability, calculated by subtracting operating expenses from gross rental income.
Notice of Action (NOA): A formal notification issued by a court or regulatory agency informing involved parties of an impending legal action or decision that may affect the status or ownership of a property. This notice is often used to inform interested parties of lawsuits, liens, or other legal proceedings that could impact the property's title or usage.
NOA (Notice of Assessment): An official document issued by a taxing authority stating the assessed value of a property for tax purposes, and the amount of property taxes owed.
Non-Disturbance Agreement: An agreement ensuring that a tenant's lease will not be terminated if the property is foreclosed upon.
Non-Judicial State: A state where the foreclosure process can occur without court involvement.
Non-Recourse: A type of loan where the lender's only remedy in case of default is to seize the collateral, with no further claim against the borrower.
Notice of Default (NOD): A formal notification issued by a lender to a borrower stating that the borrower has failed to meet the mortgage payment terms, initiating the foreclosure process.
Non-Conventional Loan: Loans with alternative approval criteria.
Non-Homestead: Property not used as a primary residence.
Non-QM Loan: Mortgages that do not meet the qualified mortgage guidelines set by regulatory agencies.
O.
Office: Building or space for commercial purposes.
Origination Fee: A fee charged by a lender for processing a new loan application.
Owner-Occupied: Property where the owner resides.
P.
Pari Passu Debt: Debt that has equal rights of payment with other debt, often meaning it is treated equally in the event of a default.
Passthrough: A structure where income generated by a property is passed directly to investors or owners.
Payoff Letter: A document provided by a lender detailing the amount needed to pay off a loan in full.
Payment Schedule: A plan detailing the timing and amount of payments to be made on a loan.
Permanent Debt: Long-term debt financing that is used to finance the acquisition or development of a property, typically with a fixed interest rate and a longer repayment period.
P&I (Principal and Interest): The combined components of a loan payment, where principal refers to the amount borrowed and interest is the cost of borrowing, both of which are paid down over the loan term.
PFS (Personal Financial Statement): A document detailing an individual's assets, liabilities, income, and expenses.
Phase 1 Environmental Site Assessment: A preliminary evaluation of a property to identify potential or existing environmental contamination liabilities, involving a review of records, a site inspection, and interviews with owners and occupants to determine if further investigation (Phase 2) is needed.
Phase 2 Environmental Site Assessment: A detailed investigation conducted after a Phase 1 Environmental Site Assessment identifies potential contamination, involving the collection and analysis of soil, water, and building materials to confirm the presence and extent of environmental hazards and determine the necessary remediation steps.
Phase 3 Environmental Site Assessment: A comprehensive investigation and remediation plan that follows Phase 2 Environmental Site Assessment findings, involving the cleanup of identified contaminants, detailed documentation, and monitoring to ensure that the site meets environmental standards and is safe for its intended use.
Phase 4 Environmental Site Assessment: The final phase in the environmental assessment process, involving ongoing monitoring and management of the site after remediation to ensure that contamination levels remain within safe limits and that no further environmental issues arise. This phase may also include periodic reporting and maintenance activities to ensure long-term compliance with environmental regulations.
Planned Unit Development (PUD): A type of building development designed as a cohesive, unified project, often with mixed uses.
Points (Loan Discount Points): Lender fees paid at loan origination.
Prepayment Penalty: A fee charged by lenders if a borrower pays off a loan before its scheduled maturity date.
Prequal Letter: A letter from a lender indicating that a borrower is prequalified for a loan based on preliminary information.
Primary Residence or Home: Main home of an individual or family.
Principal: The initial loan amount borrowed or owed against tangible collateral.
Principal and Interest (P&I): The combined components of a loan payment, where principal refers to the amount borrowed and interest is the cost of borrowing, both of which are paid down over the loan term.
Private Lenders: Individuals or companies providing private loans.
Private Real Estate Loan: Alternative loan funded privately.
Probate: The legal process of administering a deceased person's estate, including the distribution of assets to heirs and creditors.
Processing Fee: A fee charged by lenders to cover the administrative costs of processing a loan application, including document preparation and review.
Pro Forma: A financial statement that projects future income and expenses.
Proof of Funds: Documentation proving financial capability.
Q.
Qualified Personal Residence Trust (QPRT): A trust designed to remove the value of a personal residence from the trustor’s estate, reducing estate taxes while allowing the trustor to live in the residence for a set number of years.
Quitclaim Deed: A deed transferring any ownership interest the grantor has in a property without warranties.
R.
Rate and Term Refi: Refinancing a mortgage to change the interest rate or loan term without taking cash out.
Raw Land: Land that is in its natural state and has not been developed or improved.
Real Estate Broker: Facilitator of real estate transactions.
Real Estate Investor: Individual investing in real estate for profit.
Real Property: Fixed property, including land and buildings.
Recast: A change in the terms of a loan that re-amortizes the remaining balance, often resulting in a new payment schedule.
Recourse: A type of loan where the lender can claim the borrower's assets beyond the collateral in case of default.
Refinance: Replacing an existing loan with a new one.
Rehab Loan: Loan for property purchase and renovation.
Redevelopment: Construction or renovation of existing structures.
REIT (Real Estate Investment Trust): A company that owns, operates, or finances income-producing real estate, allowing individual investors to earn income from real estate investments without owning or managing properties.
REO (Real Estate Owned) Schedule: A table detailing properties owned by a lender, typically acquired through foreclosure.
Repo (Repossession): The process by which a lender takes back property or assets from a borrower who has defaulted on loan payments, typically without judicial intervention, in order to recover the outstanding debt.
Reserve Requirement: Funds set aside by property owners or managers to cover future maintenance and repair costs, ensuring the property remains in good condition
Retail Property: Commercial property for retail purposes.
Return On Investment (ROI): Measure of investment profitability.
Revocable Trust: A trust that can be altered or terminated by the trustor during their lifetime, providing flexibility and control over the trust assets.
S.
Sale-Leaseback: A transaction where the owner sells an asset and leases it back for the long-term.
Scope of Work: Detailed plan for property renovations.
Seller Carried Second: A secondary loan provided by the seller to the buyer, in addition to the primary mortgage, often used to help facilitate the purchase of a property.
Senior Debt: Debt that has priority over other debt claims in terms of repayment in the event of a borrower’s bankruptcy or liquidation.
Short Sale: Property sale below loan amount, with lender approval.
Short-Term Loan: A loan with a limited duration, often a year or less, sometimes spanning weeks or months. Typically utilized when capital is needed for investments, these loans are often granted with minimal collateral requirements.
Simple Fee (Fee Simple): The most complete ownership interest one can have in real property, with the right to use, sell, or lease the land.
Situs: The location or site of a property.
Soft Costs: Expenses unrelated to construction, such as legal fees, financing charges, architect fees, etc., necessary for project initiation or completion.
Special Needs Trust (SNT): A trust providing for a disabled beneficiary without affecting their eligibility for government benefits, ensuring financial support without disqualifying them from public assistance programs.
Special Purpose Entity (SPE): A legal entity created for a specific transaction or business purpose, often to isolate financial risk.
Sponsor: The individual or entity responsible for organizing and managing a real estate investment, often contributing equity and securing financing for the transaction.
Stabilization: The process by which a property reaches its expected occupancy and income levels, achieving consistent cash flow and operational performance after initial lease-up or renovation.
Subordinated Debt: Debt that ranks below other debts in terms of claims on assets or earnings in the event of a borrower’s bankruptcy or liquidation.
Subsidy: Financial assistance provided by the government or other entities to support or promote certain economic activities, such as affordable housing.
Survey: A detailed measurement and mapping of a property’s boundaries and features, often required in real estate transactions to confirm property lines and identify any encroachments or easements.
Syndication: The pooling of funds from multiple investors to finance a real estate project, allowing investors to share in the profits and risks of the investment.
T.
Tax Assessment: The valuation of a property by a government authority to determine the amount of property tax owed, based on the property's assessed value, which reflects factors such as location, market conditions, and property characteristics.
Tax Lien: A legal claim imposed by a government authority on a property for unpaid property taxes, which must be settled before the property can be sold or refinanced.
Tax Lien Auction: A public sale where investors can bid on the tax liens placed on properties with unpaid taxes, allowing the winning bidder to pay the owed taxes and potentially earn interest or acquire the property if the owner fails to repay the debt within a specified period.
Tax Lien Foreclosure: A legal process by which a government authority or lienholder forces the sale of a property due to unpaid property taxes, allowing the recovery of the owed taxes from the proceeds of the sale.
Testamentary Trust: A trust created by a will that only comes into effect upon the trustor’s death, managing and distributing assets according to the trustor's wishes posthumously.
Third Party Reports: Independent evaluations and assessments conducted by external experts, such as appraisals, environmental site assessments, and property inspections, used to provide objective information on various aspects of a property during the due diligence process.
TIN (Taxpayer Identification Number): A number assigned by the IRS to individuals and entities for tax purposes.
Title: Documentation proving real estate ownership.
Track Record: A documented history of a person's or organization's past performance in a particular area.
Traditional Loan/Lender: Conventional loans from mainstream banks that feature fixed interest rates and structured repayment plans, designed to be paid off over the loan term.
Triple Net Lease (NNN): A lease agreement where the tenant is responsible for property taxes, insurance, and maintenance, in addition to rent.
Trustee: An individual or organization that holds or manages and administers property or assets for the benefit of a third party, often used in the context of a deed of trust to secure a loan.
Title Commitment: A document issued by a title company that outlines the terms and conditions under which it will issue title insurance.
Turnaround Time: Duration from purchase to sale of an investment property.
U.
Underwriting/Underwriter: The process by which individuals or institutions assume financial risk for a fee. Underwriters evaluate the risk level of a real estate investment loan, verifying borrower income, assets, debt, and property details before granting funding.
Underwriting Fee: A fee charged by lenders to cover the costs of evaluating a loan application, assessing the borrower’s creditworthiness, and determining the loan terms.
V.
Vacancy Rate: The percentage of all available rental units in a property or market that are unoccupied or not rented over a specific period, used to assess the demand and performance of rental properties.
Value-Add Property: Real estate with the potential for improvements that can increase its value.
W.
Weighted Average Cost of Capital (WACC): The average rate of return a company is expected to pay its security holders to finance its assets.
X.
Xeriscaping: A landscaping method designed for arid and semi-arid climates that reduces or eliminates the need for supplemental water from irrigation, utilizing drought-resistant plants and efficient water use techniques.
Y.
Yield Maintenance: A prepayment penalty clause in a commercial mortgage that compensates the lender for the interest they would have earned if the loan had not been prepaid, ensuring the lender receives the agreed-upon yield.
Z.
Zoning: The process by which local governments regulate land use and development by designating specific areas for residential, commercial, industrial, or other purposes, setting rules and restrictions on how properties within these zones can be used and developed.
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