Glossary

  • A 1031 exchange is a powerful tax-deferment strategy for real estate held as an investment. It allows an investor to sell a property without paying capital gains on the sale.

  • Adverse possession, or “squatter’s rights,” is a legal ruling that transfers property ownership based on continuous occupancy over an extended period of time

  • After-repair value, or ARV, is the potential sales price of a home or investment property as determined by the market. Start your investing journey today.

  • An amenity is a desirable or useful feature or facility within a property structure. Amenities are typically features that are highlighted and pitched to renters when they are looking to rent at a certain complex.

  • Amortization is the gradual process of an outstanding loan balance dropping over time as the borrower makes monthly payments.

  • An appraiser is a trained, licensed professional tasked with evaluating a property to estimate its current fair value in the marketplace.

  • Appreciation is the rise in value of an asset over time, typically relating to the value of an entire asset class, such as real estate, stocks, bonds, and currencies.

  • The Annual Percentage Rate, or APR, is the yearly amount that must be paid by a borrower in order to maintain and to pay off a loan.

  • A broker is a middleman, or matchmaker, who connects a buyer and a seller. In real estate, a broker’s job is to match homebuyers and home sellers, while being paid a commission.

  • Capital expenditures (CapEx) are investments in long-term, fixed assets—like a new roof or company equipment.

  • When you sell an asset for more than you paid for it, you trigger what is called a capital gains tax—but there are ways to avoid paying this pricey tax.

  • The capitalization rate is the rate of return an investor can expect from their real estate properties, calculated by dividing the income by the market value.

  • A cash-out refinance allows homeowners to take out a new mortgage and receive additional cash, which can be used for renovations or debt pay-off.

  • Closing costs are payments by both buyers and sellers that occur during a real estate transaction, such as the sale or purchase of a house.

  • A comparative market analysis (CMA) looks at similar properties to help a real estate investor, seller, or buyer determine a home sale or offer price.

  • The Consumer Price Index is a vital economic indicator that measures how much the cost of consumer goods and services increases over a year.

  • The debt-to-income ratio calculates the ratio of monthly debt to gross income. Lenders use this number to understand how much house a buyer can afford.

  • A deed is a document showing proof of ownership for land or property. Learn more about this essential element of the real estate buying and selling process.

  • Default is the failure to repay a debt, such as a mortgage. This can lead to eviction and foreclosure and can dramatically affect a borrower’s credit.

  • Depreciation is how goods and assets lose value. But that’s not a bad thing—for savvy investors, it’s a tax strategy. Learn more about depreciation here.

  • An economic downturn happens when a country’s gross domestic product turns stagnant or starts to fall due to decreased consumer confidence. It can lead to a recession.

  • A dual agency is when a real estate agent represents both the buyers and the sellers in a transaction. It's typically a bad idea.

  • When purchasing real estate, earnest money—or a good faith deposit—shows sellers you're serious.

  • Egress is another word for "a way to get out.

  • The Fifth Amendment grants the federal government the power of an eminent domain, which allows it to take private property and convert it to public use.

  • Equity is the difference between the market value of a property and the amount of money that is still owed on the loan. A broad term, equity, at its essence, is about ownership.

  • A word with deep legal origins, “estate” has been consistently defined for centuries while adapting to the needs of the times. In essence, one’s estate is everything one owns; it’s everything that belongs to a person.

  • the action of expelling someone, especially a tenant, from a property; expulsion.

  • The Fair Housing Act prevents housing discrimination based on race, sex, religion, disability, and a number of other factors and identities.

  • The fair market value determines an asset’s value—like the appropriate purchase price for a house. Learn more about calculating fair market value here.

  • FHA loans are mortgages insured by the Federal Housing Administration (FHA), meant to boost homeownership among low-to-moderate income individuals.

  • A fixed-rate mortgage charges a set interest rate that doesn't change during the term of the loan. Learn more about these mortgages here.

  • For sale by owner (FSBO) is a real estate transaction where a property owner chooses not to hire a real estate agent and instead sells the property themselves.

  • Foreclosure is a legal process whereby a lender takes ownership of a property from the borrower after the borrower fails to honor their commitment to pay off their loan.

  • Fractional ownership is when two or more investors purchase a property together.

  • Freddie Mac, like Fannie Mae, is a home mortgage company created by the U.S. Congress. It buys and guarantees mortgages through the secondary mortgage market.

  • Gentrification is a process where a neighborhood undergoes urban development, involving an influx of higher-income residents to an otherwise abandoned or rundown area.

  • A ground lease gives tenants permission to develop a plot of land over the course of the lease.