Real estate investing glossary
Real estate investing glossary is covered here as a sourced, educational reference: what it means, how the numbers work, what it costs, and what to verify with primary sources before acting. Educational only — not financial, legal or tax advice. Consult a qualified professional for advice about your situation.
What do the key terms mean?
- Cap rate
- NOI divided by property value (or price); a yield snapshot before financing. Full page
- Cash-on-cash return
- Annual pre-tax cash flow divided by total cash invested. Full page
- NOI (net operating income)
- Effective rental income minus operating expenses, before debt service and taxes. Full page
- DSCR
- NOI divided by annual debt service; lenders use it to size DSCR loans. Full page
- ARV
- After repair value: estimated value once planned renovations are complete. Full page
- LTV
- Loan amount divided by property value, expressed as a percentage. Full page
- 1031 exchange
- A like-kind exchange under Internal Revenue Code Section 1031 deferring gain recognition when rules are met. Full page
- Depreciation recapture
- Tax on prior depreciation deductions recognized when rental property is sold. Full page
- GRM
- Price divided by gross annual rent; a rough screening multiple. Full page
- IRR
- The discount rate making net present value of all cash flows zero; time-sensitive return measure. Full page
- Equity multiple
- Total distributions divided by total capital contributed. Full page
- House hacking
- Living in part of a small multifamily property while renting the other units. Full page
- BRRRR
- Buy, Rehab, Rent, Refinance, Repeat — a value-add rental strategy. Full page
- Pooling investor capital, typically under SEC exemptions, to buy larger property led by a sponsor. Full page
- REIT
- A company owning income real estate that, if it meets IRS requirements, generally avoids corporate-level tax on distributed income. Full page
- Accredited investor
- An investor meeting SEC income, net-worth or professional criteria for certain private offerings. Full page
- CapEx
- Capital expenditures: major replacements such as roof or HVAC, reserved for separately from routine repairs. Full page
- Vacancy rate
- Share of time (or rent) lost because units are empty or rent is uncollected. Full page
Frequently asked questions
What is real estate investing terms in simple terms?
Real estate investing glossary is explained above in one line, then in full: definition, numbers, risks and checks. Start with the first section, then the worked logic in section two.
Is real estate investing terms risky?
All real estate involves illiquidity, vacancy, repair and financing risk. The risk section lists the failure modes investors most often underprice; diversification and reserves reduce, but do not remove, them.
Where can I verify the rules myself?
Use the primary sources cited at the foot of this page (IRS, CFPB, SEC, Fannie Mae/Freddie Mac, FHFA or Census, as relevant) and your state or city landlord-tenant and tax pages for local rules.
Is this financial advice?
No. This wiki is educational only and is not financial, legal or tax advice.