Glossary
Real Estate Investor Lending Glossary
The terms investors run into on term sheets, appraisals and draw requests, explained in plain English.
A
- Amortization
- The schedule by which a loan balance is paid down over time through regular payments of principal and interest.
- Appraisal
- An independent opinion of a property's value prepared by a licensed appraiser, often including as-is and after-repair or completed value.
- ARV (After Repair Value)
- The estimated market value of a property once the planned renovation scope has been completed.
- As-Is Value
- The value of a property in its current condition, before any renovation work.
B
- Bridge Loan
- Short-term financing used to move between two points, such as acquiring a property before a longer-term refinance or a sale.
- Business-Purpose Loan
- A loan made for investment or business reasons rather than for a personal, family or household purpose such as an owner-occupied home.
C
- Cash-Out Refinance
- A refinance in which the new loan amount exceeds the existing payoff, with the difference returned to the borrower where eligible.
D
- Draw
- A release of renovation or construction funds, usually after a portion of the scope is completed and verified.
- DSCR (Debt Service Coverage Ratio)
- A measure comparing a property's income to its debt obligations. Expressed simply: property income divided by debt obligations.
E
- Escrow
- Funds or documents held by a neutral third party pending completion of agreed-upon conditions.
- Exit Strategy
- The planned way a loan will be repaid, most commonly a sale of the property or a refinance into longer-term financing.
F
- Fix & Flip
- An investment strategy of acquiring a property, renovating it, and reselling it, typically over a short project horizon.
H
- Hard Money
- A commonly used term for short-term, asset-focused real estate financing where the property and project drive underwriting.
I
- Interest Only
- A payment structure in which scheduled payments cover interest, with the principal balance due at payoff or maturity.
L
- Loan Term
- The length of time a loan is scheduled to remain outstanding before it matures or must be repaid.
- LTC (Loan-to-Cost)
- A ratio comparing the loan amount to the total project cost, which may include acquisition plus renovation or construction budget.
- LTV (Loan-to-Value)
- A ratio comparing the loan amount to the appraised or market value of a property.
N
- NOI (Net Operating Income)
- A property's income after operating expenses and before debt service, taxes on income and capital items.
O
- Origination Points
- A fee charged for originating a loan, typically expressed as a percentage of the loan amount.
P
- Personal Guarantee
- A promise by an individual to stand behind the obligations of a loan made to an entity such as an LLC.
- PITIA
- Principal, interest, taxes, insurance and association dues — the components often used when measuring a rental property's debt obligations.
- Prepayment Penalty
- A fee that may apply if a loan is paid off earlier than a defined period after closing.
- Private Lending
- Real estate lending provided outside of conventional consumer mortgage channels, generally for business-purpose transactions.
R
- Rate-and-Term Refinance
- A refinance that replaces existing financing without taking meaningful cash out beyond customary costs.
- Rehab Budget
- The itemized cost of the renovation scope planned for a property, generally supported by a written scope of work.
S
- Stabilized Value
- The value of a property once construction or renovation is complete and the property is in its intended operating condition.
T
- Title
- The legal ownership of a property, reviewed and insured through a title company as part of closing.
U
- Underwriting
- The review process used to evaluate a financing request, including the property, project, numbers, borrower and exit.
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