Real Estate Investing Glossary
Every term you need to know, explained clearly. From beginner basics to advanced concepts.
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After Repair Value (ARV)
AnalysisThe estimated market value of a property after all planned renovations and repairs are completed. ARV is critical for fix-and-flip investors and BRRRR strategy practitioners to determine maximum purchase price.
Appreciation
GeneralThe increase in a property's value over time. Appreciation can be natural (driven by market forces) or forced (driven by improvements, renovations, or increased rental income).
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Cap Rate
AnalysisThe capitalization rate is the ratio of a property's net operating income (NOI) to its purchase price or current market value, expressed as a percentage. It measures the expected rate of return on an investment property.
Cash Flow
AnalysisThe net amount of money remaining after all income is collected and all expenses (including mortgage payments) are paid. Positive cash flow means the property generates profit each month.
Cash-on-Cash Return
AnalysisThe ratio of annual pre-tax cash flow to the total cash invested in a property. Unlike cap rate, cash-on-cash return accounts for financing and measures the return on your actual out-of-pocket investment.
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DSCR Loan
FinancingA Debt Service Coverage Ratio loan is an investment property mortgage where qualification is based on the property's rental income rather than the borrower's personal income. Lenders typically require a DSCR of 1.0 or higher.
Debt Service Coverage Ratio (DSCR)
FinancingThe ratio of a property's net operating income to its total debt service (mortgage payments). A DSCR above 1.0 means the property generates enough income to cover its debt obligations.
Depreciation
TaxA tax deduction that allows property owners to deduct the cost of the building (not land) over its useful life — 27.5 years for residential and 39 years for commercial property. Depreciation reduces taxable income without requiring an actual cash outlay.
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Hard Money Loan
FinancingA short-term, asset-based loan from private lenders used primarily for fix-and-flip projects or bridge financing. Interest rates are higher than conventional loans but approval is faster and based on the property's value rather than borrower creditworthiness.
House Hacking
StrategiesA strategy where an investor lives in one unit of a multi-family property (or rents out rooms in a single-family home) and rents out the remaining units to offset or eliminate their housing costs.