Investors

Here are some Real Estate Investing terms:

• Short Term Rental (STR): Rentals with agreements ranging from days to months, often used for vacation or corporate rentals.
• Vacation Rentals: Properties advertised on platforms like VRBO, Airbnb, and HomeAway for short-term stays.
• Single Family Home (SFH): A dwelling designed for a single family unit.
• Multiple Family Housing (MFH): Buildings with 2+ units. Properties with 2-4 units can be financed conventionally, while those with 5+ units require commercial financing.
• House-Hacking: An investor purchases a multi-family property, lives in one unit, and rents out the others.
• Novation: A legal process replacing one obligation or party in a contract with another, requiring agreement from all original parties.
• Assignment: A transaction where the original buyer allows another buyer to take over their rights and obligations before closing.
• Double Escrow: An investor closes on a sale with the homeowner and then with an end buyer on the same day.
• End Buyer: The final buyer in a transaction chain.
• Transactional Funding: Short-term funding provided by one investor to another, used for completing A to B, B to C transactions.
  A to B, B to C
• Transactions: Transactions where an investor cannot use end buyer funds to complete the purchase between the investor and the homeowner.
• Lease with the Option to Buy: An investor controls a property without owning it, paying an option fee upfront to lock in a purchase price for a set period.
• Proof of Funds: A statement showing sufficient funds to purchase a property at the agreed price.
• Earnest Money Deposit: A deposit held in escrow until contract contingencies are completed, deducted from the final closing amount.
• Owner’s Policy: Protects a buyer’s ownership interest against past title issues.
• Lender’s Policy: Protects the lender against past title issues; not required in cash sales.
• Title Commitment: A document disclosing liens, defects, and obligations affecting a property.
• Lien: An encumbrance on a property that must be satisfied before transferring ownership.
• Quit Claim Deed: Releases a person’s interest in a property without warranties, preventing future claims of interest.
• Probate Sale: A court-supervised process for distributing a deceased person’s assets, paying debts, and transferring remaining assets to heirs.
• Letter of Authority: A legal document designating a personal representative for a deceased person’s estate.
• Trust: A legal entity transferring property from a grantor to a beneficiary, managed by a trustee.
• Trustee: Manages trust assets on behalf of the beneficiary according to the grantor’s instructions.
• ARV (After Repaired Value): The estimated value of a property after renovations.
• MAO (Maximum Allowable Offer): The highest price an investor should offer for a property based on ARV and repair costs.
• BRRRR (Buy, Renovate, Rent, Refinance, Repeat): An investment strategy involving buying, renovating, renting, refinancing, and repeating the process.
• Triple-Net Lease: A lease where the tenant pays property taxes, insurance, and maintenance, in addition to rent.
• Cash on Cash Return: The annual return on cash invested in a property, calculated based on cash income.
• NOI (Net Operating Income): Income from a property after operating expenses.
• Cap Rate: The return on a real estate investment based on the property’s income, calculated as annual NOI divided by the property’s market value.
• 1031 Exchange: Allows deferral of capital gains tax by reinvesting sale proceeds into a similar property held for business or investment.
• Depreciation: Deductions for the cost of buying and improving a rental property, spread over its useful life.
• Appreciation: The increase in a property’s value over time, leading to potential profit upon sale or higher rental income.
• Short Term Capital Gains: Profits from selling assets held for a year or less, taxed at ordinary income rates.
• Long Term Capital Gains: Profits from selling assets held for more than a year, taxed at lower rates than short-term gains.