Your guide to common real estate investment and financing terms.
The estimated value of a property after all repairs and renovations are completed.
A short-term loan used to "bridge" the gap between the purchase of a new property and the sale of an existing property or securing of long-term financing.
A rate that helps determine the potential return on a real estate investment. Calculated by dividing a property's net operating income by its current market value.
Fees associated with completing a real estate transaction, such as loan origination fees, appraisal fees, title insurance, and legal fees.
The cash required to make scheduled payments on loan principal and interest.
A measure of a property's cash flow relative to its debt obligations. Calculated by dividing net operating income by total debt service.
A real estate investment strategy where investors purchase properties in need of repairs, renovate them, and sell them for a profit.
A short-term loan secured by real estate, typically with higher interest rates and lower loan-to-value ratios than conventional loans. Often used by investors who need quick funding.
The ratio of a loan amount to the value of the asset purchased. Calculated by dividing the loan amount by the appraised property value.
The ratio of a loan amount to the total cost of a project, including purchase and renovation costs.
The income generated by a property after deducting operating expenses but before deducting taxes and financing costs.
Fees paid to the lender at closing, typically expressed as a percentage of the loan amount. One point equals 1% of the loan amount.
The process of renovating or repairing a property to increase its value or make it habitable.
A performance measure used to evaluate the efficiency of an investment. Calculated by dividing the net profit by the cost of the investment.
Now that you understand the terminology, take the next step in your real estate investment journey.
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