The library · Glossary
Forty terms investors actually use.
From ARV to YTM. Defined the way underwriters and sponsors use them in the file room — not how textbooks describe them. Search by term or skim by letter.
All terms
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A
- ARVAfter-repair value
- The expected market value of a property after rehab is complete. Underwriters calculate ARV from comparable sales, not from the sponsor's pro forma.
- AmortizationLoan repayment schedule
- The schedule by which loan principal is repaid over time. A 30-year amortization spreads principal across 360 monthly payments; a 15-year cuts that in half.
- AssignmentWholesale transfer
- Transferring a real estate contract to another buyer for a fee. The wholesaler keeps the spread between the contract price and the assignment price.
B
- Bridge loanShort-term financing
- Capital that bridges the gap between two financing events — acquisition to refi, lease-up to permanent debt. Typically 6–24 months, interest-only, with extensions available.
- BRRRRStrategy
- Buy, Rehab, Rent, Refinance, Repeat. The investor's capital-recycling playbook for building a rental portfolio without locking up cash on each deal.
C
- Cap rateCapitalization rate
- Net operating income divided by purchase price. A way to compare the income yield of a stabilized investment property regardless of leverage.
- Cash-on-cash returnLevered yield
- Annual cash flow divided by total cash invested (down payment, closing costs, rehab). Measures yield on the capital you actually put up — not the asset.
- Construction-to-permLoan structure
- A single loan that funds construction draws and converts to permanent financing on completion. Reduces refi risk and closing costs.
D
- DSCRDebt service coverage ratio
- Net operating income divided by annual debt service. A 1.20 DSCR means the property generates 1.20× its mortgage payment. Most DSCR loans require 1.10 minimum.
- Double closeTwo simultaneous closings
- A wholesaling structure where the wholesaler buys (A→B) and sells (B→C) on the same day. The wholesaler captures the spread; transactional capital funds the A→B side.
- Draw scheduleConstruction disbursements
- The plan for releasing construction funds in stages, tied to milestones (foundation poured, framing complete, drywall, etc.). Each draw triggers a GC inspection.
E
- EMDEarnest money deposit
- The deposit placed in escrow when a contract is signed, signaling the buyer's commitment. Forfeited if the buyer breaches without a contingency basis.
- EscrowHeld funds
- Money or documents held by a neutral third party (typically the title company) until contract conditions are satisfied. Funds release at closing.
- Exit strategyHow the deal ends
- The plan for monetizing the asset — sale, refi to permanent, hold-and-rent. Underwriters care about exit because it dictates loan structure and term.
F
- Fix & flipRehab strategy
- Buying a distressed property, rehabbing, and selling at retail. Capital is short-duration, asset-based, and tied to ARV rather than borrower income.
- Foreign nationalNon-US borrower
- A borrower without US citizenship or permanent residency. Eligible for DSCR with overlay (typically 5% LTV trim, larger reserves).
H
- Hard moneyAsset-based loan
- Short-term, high-rate capital underwritten on the property rather than the borrower. The premium reflects speed and risk; the discipline is in the exit.
- HELOCHome equity line of credit
- A revolving credit line secured by home equity. Used by sponsors to deploy capital across multiple deals from a single facility.
L
- LTCLoan to cost
- Loan amount divided by total project cost (purchase + rehab). Common metric for fix & flip and construction loans, where ARV-only doesn't capture the work.
- LTVLoan to value
- Loan amount divided by property value (or ARV). Lower LTV means more borrower equity in the deal — which underwriters always like.
N
- Non-QMNon-qualified mortgage
- A mortgage outside the standard QM rule — bank statement loans, asset-depletion, P&L only. Built for self-employed borrowers and investors with non-W-2 income.
- NovationContract substitution
- Replacing one party in a contract with another, with the original party's release. Used in wholesaling to substitute the end buyer onto the seller's contract.
P
- PITIPrincipal, interest, tax, insurance
- The standard four-component monthly mortgage payment. PITIA adds HOA. The carry number that actually leaves your account each month.
- POFProof of funds
- A letter from a financial institution confirming the buyer has access to the cash needed to close. Sellers often require it before accepting an offer.
- Pro formaProjected financials
- The forward-looking income and expense statement for an investment property. Underwriters scrutinize the assumptions, especially rent comps and vacancy.
R
- Rate lockLocked interest rate
- An agreement to fund at a specified interest rate for a set period (15–60 days typically). Protects against market moves between approval and closing.
- Rehab budgetProject scope
- The detailed cost plan for property repairs and improvements. Reviewed by the underwriter against ARV to confirm the deal pencils.
T
- Term sheetWritten loan terms
- Written terms — rate, fees, advance, schedule. Distinct from "indicative" pricing; a term sheet is the actual offer the lender intends to fund.
- Title insuranceTitle coverage
- Insurance protecting against losses from defects in the title. Lender's policy is required by every lender; owner's policy is optional but cheap relative to risk.
- Transactional capitalSame-day funding
- Short-duration capital that funds and unwinds within the same closing. Used for wholesale double-closes, novations, EMDs, and POF.
U
- UnderwritingLoan analysis
- The process of evaluating a loan application — credit, asset, exit, structure. The decision-making behind whether to fund and at what terms.
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