After Rehab Value (ARV): The amount that the investment property is expected to be worth after all of the planned renovations are completed.
Appraisal: A professional assessment of how much a property is worth or will be valued at, after renovation is completed.
As-is Value: The value of a property as it exists legally and physically, in its present state.
BPO: Broker price opinion. A report that is performed by a licenced real estate agent or broker, which provides an opinion on the price of a property based on comparable values and an onsite review.
Bridge loan: A bridge loan is a shorter-term loan used while permanent financing is being secured. This type of financing provides the borrower with immediate cash flow.
Commercial Use: Property that is only used as a business; no residential component is present.
Crowdfunding: A group of investors, who don’t necessarily know each other, who buy a percentage interest in an asset and/or loan, usually through an online portal. Examples of crowdfunding rules in the US are Reg D, Reg CF, Reg A.
Default: Failure to abide by the terms of a loan (such as payment due), and such failure continues for more than a certain time period.
Distressed Properties: Properties that are in poor condition or under threat financially (which may include foreclosure); they usually represent opportunities for fix and flip projects.
Draw Schedule: A payment plan for construction or renovation projects. This schedule helps lenders determine when they are going to distribute funds to their borrower based on the value of the work completed.
Exit Strategy: How the borrower plans to repay their loan, and turn a profit.
Flipping: Buying a property and then renovating the property in order to increase the value of the asset to such an extent that it may be sold at a profit.
Foreclosure: The process by which a lender legally takes control of a property because the borrower defaults on the loan.
hard money loan: A loan typically secured by a hard asset such as residential or commercial real estate.
Holding Costs: Costs attributed to owning an investment property for a period of time. This includes interest payments, property taxes, house maintenance, insurance and other costs.
Interest Rate: The amount expressed as a percentage that a borrower has agreed to pay a lender as the price of borrowing a sum of money.
Liquidity: A measure of the speed that an asset can be sold at.
Loan To Cost (LTC): This is a ratio derived from the formula (Loan Amount) / (Purchase Price)
Loan to Value (LTV): This is a ratio derived from the formula (Loan Amount) / (Appraisal Value).
Maturity (Loan Term): Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.
Points: An origination fee where one point is equal to one percent of the principal loan total.
Private Lending: An individual or group of individuals that lends to real estate investors. Sometimes used interchangeably with hard money lending.
Real Estate Broker: Person or firm that helps their clients buy and sell their real estate for a fee.
Real Estate Investor: Someone who purchases properties with the intention of making a profit, either through holding for rental income or reselling it for a profit.
Refinance: Replacing an existing loan with a new one. Typically, people refinance to get a lower interest rate on their loan and/or to leverage real estate value for cash.
Return on Investment (ROI): A measure of the amount of return on an investment relative to the investment’s cost.
Title: Proof of legal ownership of a real estate asset.
Turnaround Time: The amount of time it takes from when the investment property is purchased to when it is sold.
Underwriting: The assessment of risk and reward for a potential investment. Underwriters determine the credibility of the potential investor and whether their investment is going to be profitable.