A
Agreement of Sale: It is a document that is sent by the buyer to a seller of an investment property detailing the price and conditions of the sale of that particular property
Airbnb Rental Income: The Airbnb rental income is the monthly income from short-term rentals of your property. Different properties yield varying traditional and Airbnb rental incomes, influenced by property type and market. Mashvisor’s investment property calculator provides instant expected rental income for properties across the US, aiding strategy decisions.
Airbnb rentals/Short-term rentals: Airbnb rental properties, also known as short-term rentals, are a real estate investment option where properties are listed on platforms such as Airbnb for brief guest stays, usually lasting a few days. This results in a higher turnover rate among tenants, potentially necessitating increased maintenance and renovations. However, this approach can also yield greater financial returns compared to traditional long-term rentals. For more information, click here.
Airbnb Calculator: This is a tool that collects data from reliable sources, including actual Airbnb rental properties. It provides accurate and up-to-date information that can help you make the right investment decision in just a few minutes. For more information, click here.
Appreciation: This is an increase in the value of a real estate property over time. The increase in value may be due to a number of reasons such as inflation, increased demand, or weakening supply.
B
Buyer’s market: This is a real estate market where the demand for properties for sale is lower than the supply. Property prices are usually low, making it an ideal market for buyers.
C
Capitalization (Cap) Rate: Capitalization rate or cap rate is the ratio of the net operating income produced by an investment property to its capital cost or current market value. This is one of a few real estate investing terms that refers to the rate of return expected from an investment property. Beginners should make sure to study each one and understand the major differences between them. For more information, click here.
Cash Flow: Cash flow refers to the amount of money that an investor can pocket at the end of each month after payment of all operating expenses, including loan payments. Cash flow can be positive or negative. If you spend less money than you earn, you will have a positive cash flow. If the cash outflows are more than the cash inflows, you will have negative cash flow.
Cash on Cash (CoC) Return: Cash on cash return is the ratio of annual cash flow before tax to the total cash invested, expressed as a percentage. This financial metric allows investors to assess the cash flows from their income-generating assets. For more information, click here.
Closing statement: The final agreement document between buyer and seller which indicates all details and agreements made on the sale of property from one party to the other.
Credit score: A credit score is a numerical expression that evaluates the creditworthiness of an individual based on an analysis of their credit files. It is usually used by lenders to determine if someone qualifies for a loan, the credit limits, and interest rate.
D
Debt-to-Income ratio: This is a personal finance measure used to compare the monthly debt payment of an individual to their monthly gross income. Lenders use this metric to measure the ability of an individual to manage monthly debt repayments.
E
Equity: Equity refers to the difference between the present market value of a property and the amount the owner owes on the property’s mortgage. The value of equity builds up gradually over time as the mortgage balance reduces and the property’s market value appreciates.
H
Hard money loan: A hard money loan is an asset-based loan issued by private investors or organizations. They are typically quick to fund but have higher interest rates than conventional loans.
I
Income property: Income property is a real estate property that is bought with the purpose of generating profit. It’s essentially what you’re investing in. It’s the property that will generate cash for you in the short run and appreciation in the long run.
Internal Rate of Return: Internal rate of return is the discount rate at which the net present value (NPV) of all cash flows from an investment or project are zero. This metric is used to estimate the profitability of potential investments.
L
Long-term rental (Traditional rental): A long term rental is an investment property bought for the purpose of renting it out to tenants for a long period of time. Investing in long-term rentals is the most common real estate investment strategy.
M
Multi-Family home: A multi-family home is a building that is designed to house many different families in separate housing units. Apartment buildings, duplexes, and townhomes are examples of multi-family homes. For more information, click here.
N
Net operating income (NOI): Net operating income is income that is generated annually from an investment property after deduction of property expenses. Such expenses may include property tax, property management fees, and utilities.
O
Off-market property: An off-market property is one that has been sold or is in the process of being sold without any public knowledge or advertisement. Off-market properties are not listed on the public MLS for sale.
Operating expenses: This term is incredibly important for investors who are going down the path of short-term rental investments. Understanding operating expenses can give you a better indication of how much money your property will earn overall. Operating expenses are the costs that keep the property in service, like taxes, insurances, maintenance, renovations and utilities.
P
Pre-approval letter: A pre-approval letter is a letter offered by a bank before you start looking for a home or apply for a mortgage to determine what you can afford. It assures home sellers that you can be granted a loan when needed.
Predictive analytics: Predictive analytics is the analysis of big data using historical data to predict future trends. Predictive analytics provide real estate investors with reliable forecasts of the return on investment they can expect from a particular investment property.
R
Realtor: A realtor is a person who acts as an agent in real estate transactions and is a member of the National Association of Realtors. A realtor must abide by the standards and code of ethics of the association.
Real estate broker: A real estate broker is a licensed professional who represents buyers and sellers of real estate and can work independently.
Real estate indicators: CoC return, cap rate, ROI, and NOI are all very important real estate indicators. They can tell you which real estate investments are worth it, and which ones are not. To find out more information on these indicators, make sure to use Mashvisor’s investment analytical tools to optimize your property research and to make more informed investment decisions in real estate.
Rental property: This is one of the most common real estate investing terms. It refers to a type of property from which the owner receives a monthly payment from the occupants (tenants) for using or occupying the property. Rental property may be either residential real estate or commercial real estate. For more information, click here.
Rental income: Rental income is the money that is periodically paid by the tenant to the landlord for using the landlord’s property. This is also one of the most common real estate investing terms that you will encounter in your investment journey.
Return on investment (ROI): Return on investment, or ROI, is a way to measure how well a real estate investment is doing. It’s basically how much money you’re making in relation to how much money you spent or have invested in a property. For more information, click here.
The formula for ROI is: ROI = Net Profit of Investment/Money Invested
Right of Rescission: Basically, it is the amount of time that a potential investor has in which they have the right to cancel a loan agreement before it becomes enforced by law.
S
Seller’s market: This is a real estate market where the demand from property buyers exceeds the supply of property for sale. Property prices tend to be higher and more attractive to sellers.
Single-Family home: A single-family home is a free-standing residential building. It is not attached to any other dwelling structure.
T
Traditional Rental Income: Traditional rental income simply refers to the monthly income that you will be able to receive from renting your income property out to tenants for long-term stays.
