Are you just starting out in real estate? Are you overwhelmed by the long list of confusing terms that you need to know? We understand!
Every industry has its fair share of jargon and acronyms, and real estate is no different. In this comprehensive guide, we can help you learn more about the important terms to know in real estate.
19 Real Estate Terms That You Should Know
1. Rental Property
This refers to a type of property that the owner would rent to other people to live or work out of in exchange for a monthly rent payment. Rental properties can either be commercial or residential.
2. Short-Term Rental Property
A short-term rental property is a property that is rented out for less than one year, usually days or weeks. This is also known as a vacation rental. Owning an AirBnB would be a good example.
3. Long-Term Rental Property
Also known as a traditional rental property, this is an investment that is purchased for the purpose of renting it out to tenants for one year or longer.
4. Single-Family Home
A single-family home is a property that is free standing, and not attached to any other buildings.
5. Multi-Family Home
A multifamily home is a property that can be used to house multiple families in different units that are all relatively separate from each other. Examples of a multifamily home are apartment buildings, duplexes, and triplexes.
6. Home Equity
Equity refers to the difference between the market value of a property you own and how much you still owe on the home loan.
The overall value of your equity will grow over time as the market value of your property goes up and you continue to pay down your home loan.
7. Rental Income
Rental income is the money that a landlord makes when charging a tenant for the use of the landlord’s rental property.
8. Cash Flow
Cash flow is the amount of money that a landlord can keep for themselves at the end of every month after paying any operating or mortgage expenses. A landlord can have either a positive cash flow or a negative one.
If you can spend less money than you are earning, then you will end up with a positive cash flow. However, if your expenses are higher than your income, you will have a negative cash flow.
9. Pre-Approval Letter
This is a letter that you can obtain from your bank to determine what you are able to afford before you begin your search for a property to buy. This can assure a home buyer that they will be able to get the necessary loan from the bank when they need it.
10. Seller’s Market
In real estate, a seller’s market is when the demand for buying property outweighs the supply of properties available. This usually means that property prices will be harder to negotiate, and the buyer will have less room to ask for concessions.
11. Buyer’s Market
Alternatively, there is also a buyer’s market in real estate. This is when the demand for buying a property is lower than the supply of properties for sale.
This means that the sellers may be more willing to negotiate or agree to concessions.
12. Appreciation
Appreciation refers to the increased market value of a property over time. This increase can happen for several reasons, including inflation, high demand, or a lower supply.
13. Predictive Analytics
This refers to the use of historical data to predict future trends in real estate. People who invest in real estate often use this as a tool to reliably determine whether a certain property will give them a worthwhile return on their investment.
14. Hard Money Loan
This is a loan that is based on assets and used by private investors or organizations. These loans are usually easier to get, however they tend to have higher interest rates and short terms.
15. Net Operating Income (NOI)
NOI refers to the income that a landlord generates each year from their investment property after all the expenses have been considered. This does not include debt service.
16. Capitalization Rate
Usually referred to as a cap rate, this term is the ratio of your net operating income from rental property compared to its current market value.
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This is used to calculate an investor’s annual rate of return.
17. Off-Market Property
A property is off-market when it is being sold without any public advertisement or acknowledgement.
18. ROI
ROI stands for return on investment. ROI is used to evaluate the financial performance of your rental property. When you partner with us, we calculate your ROI and keep you updated through our thorough reporting.
19. Cash-Flow Analyzer
This is our unique tool that we can use to help you determine and forecast what your return on investment, cash flow, and cap rate will be for a specific property. This is a great way to figure out if a property will be a good investment prior to purchasing it.
Bottom Line
These are just some of the important terms that are crucial to know if you are pursuing a successful career in real estate. If you have any other questions about terms that you need to know, or any other aspect of your property management needs, contact Service Star Realty today.
Contact us today.
Service Star Realty
2929 East Camelback Road #119, Phoenix, AZ 85016
(480) 426-9696
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