Real Estate Investing Glossary: Real Estate Terms in Plain English

A quick rental screen: monthly rent should be at least 1% of the purchase price. It's a filter, not a full analysis.

A U.S. tax rule (Internal Revenue Code Section 1031) that lets investors defer capital gains tax by selling one investment property and buying another. You have 45 days to identify the replacement and 180 days to close.

A rule of thumb that operating expenses, not counting the mortgage, will take about half of a rental's gross rent over time.

A flipping rule of thumb: pay no more than 70% of ARV minus repair costs. The 30% cushion covers holding costs, selling costs and profit.

An owner who doesn't live in the property. You spot one in county records when the owner's mailing address is different from the property address. Many are landlords, heirs or owners who moved and kept the house.

A loan whose interest rate is fixed for an initial period, then adjusts on a schedule based on a market index.

What a property should sell for once it's fully renovated, estimated from recently sold, renovated homes nearby. ARV drives your offer, your loan and your profit.

The name for a wraparound loan in states that use deeds of trust. The new note includes, or wraps around, the balance of the existing loan.

Paying off a loan in scheduled payments, where early payments go mostly to interest and later payments mostly to principal.

A licensed appraiser's professional opinion of a property's value, usually ordered by the lender before it approves a loan.

An increase in a property's value over time, from market growth or from improvements.

A sale between unrelated parties, each acting in their own interest. Appraisers and lenders rely on arm's-length sales as true market comps.

Past-due loan payments, plus any late fees. Paying the arrears to bring a loan current is called reinstatement.

A sale where the seller won't make repairs. Depending on state law, the seller generally still has to disclose known major defects.

The value the county assigns a property for tax purposes. It often differs from market value, sometimes by a lot.

The unique ID the county assigns to each parcel of land. It's the most reliable way to look up a property in county records.

What the end buyer pays a wholesaler to take over the purchase contract.

Transferring your rights as the buyer in a purchase contract to another buyer, who then closes on the property. The contract has to allow assignment.

A loan a qualified buyer can take over from the seller, keeping its interest rate and remaining balance. FHA, VA and USDA loans are generally assumable with lender approval; most conventional loans aren't.

Software that estimates a property's value from sales data and property records. It's fast and good for screening, but it can't see condition, so check it against your own comps.

The court order that takes effect when someone files for bankruptcy, temporarily stopping most collection actions, including foreclosure.

A large lump-sum payment due at the end of a loan, after smaller regular payments. Common in seller-financed and short-term loans.

A property whose owner has filed for bankruptcy. A sale usually needs approval from the bankruptcy trustee or the court.

Someone who finds potential deals and passes the leads to an investor for a finder's fee. Some states restrict paying unlicensed people for real estate leads, so check local rules.

Buy, Rehab, Rent, Refinance, Repeat. You buy below value, renovate, rent the property out, then do a cash-out refinance to pull money back for the next deal.

Buying a property to rent out and keep for the long term, earning cash flow and appreciation.

A wholesaler's list of active investors and what each one buys, used to sell or assign deals quickly.

Net operating income divided by the property's price or value. A property with $12,000 of NOI bought for $150,000 has an 8% cap rate.

A buyer who purchases without a mortgage. Investors find them in public records as purchases recorded with no matching loan.

What's left from rent each month after all expenses and the loan payment. Positive cash flow means the property pays you; negative means you pay it.

A year's pre-tax cash flow divided by the cash you actually put in, including the down payment and rehab. It measures the return on your own money.

Replacing a loan with a bigger one and taking the difference in cash. It's the "refinance" step in the BRRRR strategy.

The final step of a sale: documents are signed, money changes hands and the deed is recorded.

Fees paid to complete a sale, such as title, escrow, lender, recording and agent fees. The contract and local custom decide who pays which ones.

Any claim or defect, such as an unreleased lien or a missing heir, that makes ownership uncertain. It has to be cleared before a clean sale.

A citation from the city or county for a property problem, such as unsafe conditions, an overgrown yard or unpermitted work. Repeated violations can signal an owner who's overwhelmed.

Loan-to-value that counts every loan on the property, such as a first mortgage plus a home equity line of credit.

Recently sold properties near the subject property that match it in size, age, beds, baths and condition. They're the basis of any value estimate.

A real estate agent's estimate of a property's value based on comparable sales. It's an opinion of value, not a licensed appraisal.

A condition in a contract that must be met for the sale to go through, such as an inspection, appraisal or financing.

A seller-financing setup where the buyer makes payments to the seller, but the seller keeps legal title until the contract is paid off. Rules and buyer protections vary a lot by state.

A mortgage that isn't insured or guaranteed by a government agency. Most follow Fannie Mae or Freddie Mac guidelines.

The share of leads that move to the next step, such as from mailed to called back, or from offer to signed contract.

A property titled to an LLC, corporation or other business instead of a person. Reaching the decision-maker usually means looking up the company's registered agent or officers in state business records.

Customer relationship management software that tracks every lead, conversation, follow-up and deal stage in one place.

How long a listing has been for sale. A high number can point to an overpriced property or a seller who may be more flexible.

Net operating income divided by the year's loan payments. Lenders that make DSCR loans qualify the property's income instead of the borrower's personal income.

The signed legal document that transfers ownership of real estate from one party to another.

A security document used in many states instead of a mortgage. A neutral trustee holds the power to sell the property if the borrower defaults.

A court judgment for the amount still owed when a foreclosure sale brings in less than the loan balance. Some states limit or bar them.

This term has two meanings: a drop in a property's value, or the tax deduction that lets rental owners write off the building's cost over time.

Letters or postcards sent to owners on a lead list. Mail reaches owners with no phone number on file and doesn't fall under the calling rules.

A property under financial or physical strain: behind on payments or taxes, in foreclosure, or in poor condition. Distressed properties often sell below market value.

A property owned by a couple going through a divorce. A court order or settlement may require it to be sold or divided.

Checking a call list against federal and state Do Not Call lists and removing the matches before anyone dials.

Two back-to-back closings: the investor buys from the seller, then immediately sells to the end buyer. Used when a contract can't be assigned or the fee is large.

The cash a buyer puts toward the purchase price upfront. The rest is financed.

Driving or walking neighborhoods to spot vacant or run-down properties, then looking up the owners in public records.

A loan term that lets the lender demand full repayment if the property is sold or transferred. It's the main risk in subject-to deals.

A deposit the buyer makes after signing a purchase contract to show good faith. The contract decides who keeps it if the deal falls through.

A legal right for someone else to use part of a property for a specific purpose, such as a utility line or a shared driveway.

When a building, fence or other improvement crosses onto a neighbor's property. It can cloud the title and complicate a sale.

In creative finance, the total cash needed to take over a deal: past-due payments, cash to the seller, closing costs and any repairs.

A property's value minus everything owed against it. If a house is worth $300,000 and the owner owes $180,000, the equity is $120,000.

An arrangement where a neutral third party holds money and documents until every condition of the sale is met, then releases them at closing.

Equity calculated by a data platform from an estimated value and the recorded loans. It can miss unrecorded refinances, credit-line draws and liens, so confirm it before you rely on it.

A property whose listing agreement ended without a sale. The owner wanted to sell and couldn't, which can make them open to other options.

A mortgage insured by the Federal Housing Administration, with lower down payment and credit requirements. It's meant for owner-occupants, not pure investment properties.

Applying several search filters at once in a single property search, for example vacant, out-of-state owner and 50% or more equity.

Buying a property below value, renovating it and reselling it for a profit.

A loan with the same interest rate for its whole term, so the principal and interest payment never changes.

A property the owner is selling without a listing agent. FSBO sellers handle pricing, showings and negotiation themselves.

The public sale where a property in foreclosure goes to the highest bidder, run by a trustee or sheriff. Buyers usually need cash or certified funds and often can't see inside first.

A property with no open mortgage recorded against it. Strictly speaking, the term also means no liens of any kind, so check for tax liens or judgments before assuming it's fully clear.

A loan, often from a private lender, that covers the part of a deal the main lender won't, such as the down payment or rehab costs.

A 1982 federal law that limits when lenders can enforce a due-on-sale clause on homes, for example on transfers to a spouse or child, or into a living trust where the borrower stays a beneficiary. It generally doesn't cover a sale to an investor.

The price divided by a year's gross rent. It's a quick screen: a lower GRM means you're paying less for each dollar of rent.

A year's rent divided by the property's price, before any expenses.

A short-term loan from a private lending company, based mostly on the property's value. It's faster and easier to get than a bank loan, but with higher rates and fees.

A property where the owner owes little compared to what it's worth. Investors often look for 40% equity or more, because those owners can sell at a discount and still walk away with cash.

A lien a homeowners association places on a property for unpaid dues or assessments. In some states, the association can foreclose on it.

The ongoing costs of owning a property until it sells or refinances: loan payments, taxes, insurance, utilities and upkeep. Also called carrying costs.

A revolving credit line secured by a property's equity. You can borrow, repay and borrow again during the draw period.

Living in part of a property and renting out the rest, such as one unit of a fourplex, so the rent covers much of your housing cost.

A creative deal that combines strategies, most often taking over the existing loan subject-to and having the seller finance part of their remaining equity.

A property passed to heirs after the owner's death. Heirs who live far away or share ownership with siblings are often open to selling.

A payment that covers only the interest, so the loan balance doesn't go down. Often used in short-term or seller-financed deals.

Two or more parties teaming up on a deal, usually splitting money, work and profit under a written agreement.

A lien created when a creditor wins a court judgment against an owner and records it against their property.

A foreclosure that goes through the courts: the lender files a lawsuit and a judge oversees the sale. Usually slower than a non-judicial foreclosure.

A trust that holds title to real estate and keeps the beneficiary's name off public records. Some investors use one in subject-to deals, but it doesn't by itself remove due-on-sale risk.

The stages a lead moves through, from first contact to signed deal. Tracking each stage shows where leads drop off.

A list of properties and owners that match criteria tied to a reason to sell, built from public records and data platforms.

A lease that gives the tenant the right, but not the obligation, to buy the property at a set price within a set time.

A lease where the tenant agrees to buy the property at the end of the term. Unlike a lease option, the tenant is committed to the purchase, not just given the right to buy.

A legal claim against a property for a debt. Liens generally have to be paid off or released before the property can be sold with clear title.

A recorded document showing a lien has been paid or satisfied and no longer attaches to the property.

A document that lets someone act for another person on specific matters only, such as handling the loan or insurance on one property.

A recorded notice that a lawsuit affecting the property, such as a judicial foreclosure, has been filed.

Combining two or more lead lists and focusing on owners who appear on more than one, such as absentee plus high equity. Overlap usually signals stronger motivation.

The company that collects loan payments, manages escrow and tracks the balance. In seller-financed deals, a third-party servicer keeps clean payment records for both sides.

The loan balance divided by the property's value, shown as a percentage. A $150,000 loan on a $200,000 home is 75% LTV.

An owner who has held a property for decades, often with a lot of equity. Some want to downsize. Outreach should be respectful and pressure-free.

The price a property would likely sell for between a willing buyer and a willing seller on the open market.

The most you can pay and still hit your profit target. A common formula is MAO = (ARV × 0.70) − repairs, minus your fee if you're wholesaling the deal.

A lien filed by a contractor or supplier who wasn't paid for work or materials on a property.

How long it would take to sell every active listing at the current sales pace. Lower numbers favor sellers; higher numbers favor buyers.

A document that pledges a property as security for a loan. In everyday use, the word also means the loan itself.

An owner with a real reason to sell quickly or below full retail, such as money trouble, a life event or a property they no longer want to deal with.

A free list run by the Federal Trade Commission where people register phone numbers that don't want telemarketing calls. Investors scrub call lists against it before dialing.

When an owner owes more on a property than it's worth. These owners usually can't sell without bringing cash to closing or getting a short sale approved by the lender.

A year's rental income minus operating expenses, before the mortgage payment. It's the starting point for cap rate and most rental valuations.

A foreclosure handled outside of court, using a power-of-sale clause in the deed of trust. A trustee runs the sale.

A recorded notice that a borrower has fallen behind on a loan secured by the property. In many non-judicial foreclosure states, it's the first public sign of a foreclosure.

A recorded and published notice that sets the date, time and place a property will be sold at a trustee's auction in a non-judicial foreclosure.

An agreement that lets an investor list and sell a property on the open market, often after improvements, paying the seller an agreed price and keeping the difference. Rules vary by state.

A property that isn't listed for sale on the MLS. Investors find the owner through public records and reach out directly.

A property currently listed for sale, usually on the MLS, where every buyer and agent can see it.

An absentee owner whose mailing address is in a different state from the property. Distance makes repairs and tenant problems harder to handle, which can make these owners more open to selling.

Principal, interest, taxes and insurance: the four parts of a typical monthly mortgage payment.

A property an agent markets privately to a small group of buyers instead of publishing it on the MLS. MLS rules on this practice vary and have changed in recent years.

The period after a lender files a default notice and before the property is sold at a foreclosure auction. The owner can still catch up on payments, refinance or sell.

The sale price divided by the living area. It's a quick way to compare properties, but it ignores condition, lot size and layout.

A loan from an individual, such as a friend, colleague or private investor, on terms the two of you negotiate.

A property owned by someone who has died and is going through probate, the court process that settles their estate. The executor or heirs decide whether to keep or sell it.

The borrower's written promise to repay a loan on stated terms. The mortgage or deed of trust secures that promise with the property.

A bank statement or lender letter showing you have the money to close. Sellers and agents often ask for one with a cash offer.

A deed that transfers whatever interest the seller has, with no guarantee the title is clear. Common between family members.

A window, set by state law, in which a former owner can reclaim a property after a foreclosure or tax sale by paying what's owed. Not every state has one.

Replacing an existing loan with a new one, usually for a lower rate, a different term or cash out.

A general term for lease options and lease purchases, where the deal gives the renter a path to buying the home.

A property the lender took back after it didn't sell at the foreclosure auction. Banks usually sell REOs through agents, often as-is.

A licensed professional who takes loan applications and negotiates loan terms. Federal rules can require sellers who finance homes for owner-occupants to use one, so check with an attorney.

The profit from an investment divided by its total cost, shown as a percentage.

A loan for homeowners 62 or older that pays out from their home equity. The balance grows over time and is usually repaid when the home is sold.

A prerecorded message dropped straight into a voicemail box without the phone ringing. The FCC has ruled these count as calls under the TCPA, so the same consent rules apply.

An investor leases a property from the owner with an option to buy, then subleases it to a tenant-buyer with their own option, earning the spread between the two.

A line-by-line list of every repair and upgrade a property needs, used to price the rehab and manage contractors.

A form where the seller lists known problems with the property. What has to be disclosed varies by state.

The seller acts as the lender, and the buyer pays the seller over time instead of getting a bank loan. Also called owner financing or a seller carry-back.

A second loan the seller carries behind the first mortgage, covering part of the price so the buyer needs less cash.

A sale for less than the amount owed on the mortgage, with the lender agreeing to accept the shortfall. Lender approval is required and can take months.

A property rented by the night or the week, often through booking platforms. Many cities regulate or restrict short-term rentals, so check local rules first.

Finding current phone numbers and email addresses for a property owner, using data compiled from public and commercial sources. No provider finds a working number for everyone.

Buying a property while leaving the seller's existing loan in place and taking over the payments. The loan's due-on-sale clause still applies, so the lender could call the loan due.

An auction where the county sells the property itself to recover unpaid taxes. Rules, redemption rights and title quality vary widely by state.

A legal claim the county places on a property for unpaid property taxes. Depending on the state, the county may sell the lien to investors or eventually sell the property itself.

A property whose owner is behind on property taxes. The longer the taxes go unpaid, the closer the property gets to a tax lien sale or tax deed sale.

The Telephone Consumer Protection Act, the federal law that limits autodialed calls, prerecorded messages and texts to cell phones without consent. Violations can bring damages for each call.

A form the borrower signs that lets the lender share loan details with someone else, such as an investor checking the balance and payment history.

A landlord showing signs of wanting out, such as long ownership, unpaid taxes, code violations or repeated vacancies. Every tired landlord is an absentee owner, but most absentee owners aren't tired landlords.

Legal ownership of a property and the rights that come with it. The deed is the document that transfers title.

A policy that protects the buyer or lender against losses from title problems the title search missed.

A review of public records to confirm who owns a property and to find any liens, judgments or other claims against it.

A very short-term loan, often repaid the same day, that pays for the first purchase in a double close.

A mortgage backed by the U.S. Department of Agriculture for eligible buyers in qualifying rural and some suburban areas.

A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, service members and some surviving spouses, often with no down payment.

A property no one is living in. Data providers often flag vacancy from U.S. Postal Service records showing mail delivery has stopped. A drive-by confirms it.

A deed in which the seller guarantees they hold clear title and will defend the buyer against claims.

Putting a property under contract and then assigning that contract, or reselling the property, to another buyer for a fee. A growing number of states regulate wholesaling.

Seller financing that wraps around the seller's existing loan: the buyer pays the seller, and the seller keeps paying the original lender.

A home in foreclosure that the owner has already moved out of. It sits empty while the lender hasn't taken it back yet, which often means growing maintenance problems.