Real Estate Investor Abbreviations and Jargon

Real estate investors, brokers and agents are as guilty as any other industry practitioners at using jargon and abbreviations that seem commonplace to us, but are often confusing to our clients and customers. As a reminder to slow down and explain these important terms and concepts, especially to new clients, here is a list of the most common jargon and simple explanations:

* ARV – After-Repaired Value. The estimated resale or new appraisal value of a property after remodeling or repairs are complete.

* CMA – Comparative Market Analysis. A report run by a real estate professional to estimate the value of a property for a listing.

* CAP (Cap Rate) = Capitalization Rate. A measure of the quality of an income property investment based on income and expenses expressed as a ratio. (NOI/COST=CAP)

* COCR – Cash on Cash Return. A simple calculation of the return on initial cash invested relative to annual cash flow. (cash flow/initial investment).

* DBA – Doing Business As. Business name registered as ancillary to the actual entity or person filing taxes or bank account deposits.

* DOT – Deed of Trust. Document filed by a lender to publicly show proof of loan or lien on real property.

* FHA – Federal Housing Administration. The federal agency in the Department of Housing and Urban Development that insures residential mortgages.

* HOA – Homeowners Association. A group that governs a subdivision, condominium or planned community or other real estate with a common purpose.

* HUD – Housing and Urban Development. The United States federal department that administers federal programs dealing with housing.

* I/O- Interest Only (loan). A type of loan amortization in which the principal balance of the loan neither increases nor decreases.

* IRR – Internal Rate of Return. The average annual compound rate of return received by an investor over the life of their investment.

* L/O – Lease Option. A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.

* LLC – Limited Liability Company. A legal structure for businesses which is designed to combine attributes of corporate and partnership structures.

* LOI – Letter of Intent. A document outlining an agreement between two or more parties before the agreement is finalized.

* LTC – Loan to Cost. The ratio of the price paid for a property to amount of the loan used to finance the purchase. Often used to calculate a purchase AND repair or build costs.


* LTV – Loan to Value. The amount of money being loaned (borrowed) against the appraised value.

***More Real Estate Terms: The Private Market