Real Estate Investing Glossary: 30 Terms Every Beginner Should Know

Real estate investing has its own language. When you're first starting out, conversations with investors can feel like a foreign language — ARV, DSCR, NOI, LTV, CapEx. Here are the 30 most important terms, explained in plain English.

A

ARV (After Repair Value) The estimated market value of a property after all planned renovations are complete. ARV is central to BRRRR deals and fix-and-flip investing — it's what you're buying toward, not what you're buying from. Learn more →

Assignment Contract A contract that transfers your rights to purchase a property to another buyer. Used in wholesaling — you put a property under contract, then "assign" that contract to an investor for a fee. Learn more →

Accredited Investor An investor who meets SEC income or net worth thresholds ($200k+ annual income or $1M+ net worth excluding primary residence). Required to participate in many private real estate deals and syndications.

B

BRRRR method Buy, Rehab, Rent, Refinance, Repeat. A strategy for building a rental portfolio by recycling capital — you buy a distressed property, fix it up, rent it out, then refinance to pull your money back out and do it again. Full guide →

Buy and Hold The strategy of purchasing rental property and holding it long-term for cash flow and appreciation. The opposite of fix-and-flip. Most passive income investors are buy-and-hold investors.

C

cap rate (Capitalization Rate) net operating income ÷ Property Value × 100. Measures the annual income return on a property as if you'd paid cash. Used to compare properties and gauge market pricing. Full guide →

CapEx (Capital Expenditures) Large, infrequent expenses that maintain or improve a property's value — roof replacement, HVAC system, water heater, new windows. Smart investors budget 5–10% of rent monthly for CapEx.

Cash Flow What's left after paying all expenses from rental income — mortgage, taxes, insurance, management, maintenance, and vacancy. The most important number in rental property investing. Full guide →

cash-on-cash return Annual cash flow ÷ total cash invested. Measures the return on your actual out-of-pocket investment (down payment + closing costs). A more useful metric than cap rate when you're using financing.

Creative Financing Any acquisition method that doesn't use a conventional bank loan — subject-to, seller financing, HELOC, hard money, private money, lease options, and more.

D

DSCR (Debt Service Coverage Ratio) Net Operating Income ÷ Annual Debt Service (mortgage payments). Lenders use this to evaluate whether a property generates enough income to cover its loan payments. A DSCR above 1.25 is generally considered healthy.

Due Diligence The investigation process before closing a real estate deal — inspections, title search, reviewing leases, verifying income and expense numbers, checking zoning, and more.

E

equity The portion of a property's value that you own outright. Equity = Property Value − Outstanding Mortgage Balance. Equity builds through appreciation, loan paydown, and forced appreciation from renovations.

F

Fix and Flip Buying a distressed property, renovating it, and selling it quickly for a profit. A short-term strategy focused on a one-time gain rather than ongoing cash flow.

H

Hard Money Loan A short-term, asset-based loan from a private lender, not a bank. Used for BRRRR and fix-and-flip deals because they close fast and don't require the property to be in livable condition. High interest rates (8–14%) but flexible terms.

HELOC (Home Equity Line of Credit) A revolving credit line secured by home equity. Investors use HELOCs to fund down payments or rehab costs on investment properties without selling assets or getting new loans. Full guide →

House Hacking Living in an investment property and renting out other units or rooms to offset your mortgage. One of the best beginner strategies because it lets you use owner-occupied financing (lower down payment, better rates). Full guide →

L

LTV (Loan-to-Value) Loan balance ÷ Property Value × 100. A 75% LTV means your loan is 75% of the property's value and you own 25% equity. Lenders use LTV to assess risk — lower LTV = less risk for the lender.

N

NOI (Net Operating Income) Gross rental income minus operating expenses (not including mortgage payments). NOI is used to calculate cap rate and DSCR. It's the income a property generates before financing is factored in.

P

PMI (Private Mortgage Insurance) Insurance that protects the lender (not you) if you default. Required when you put less than 20% down on a conventional loan. Typically costs 0.5–1% of the loan annually. You can request removal once you reach 20% equity.

R

ROI (Return on Investment) A general measure of investment performance — profit divided by cost. In real estate, often replaced with more specific metrics like cash-on-cash return or equity multiple.

S

Seller Financing The seller acts as the bank — instead of getting a mortgage from a lender, you make monthly payments directly to the seller. Often used when a buyer can't qualify for conventional financing or when a seller wants to create an income stream from the sale.

Subject-To Purchasing a property "subject to" the seller's existing mortgage — you take the deed while the loan stays in the seller's name. You make the payments. The lender isn't involved in or informed of the transfer. Full guide →

Syndication Pooling money from multiple investors to purchase a large property (usually commercial multifamily). One sponsor manages the deal; passive investors provide capital in exchange for a share of cash flow and equity. Typically limited to accredited investors.

U

Underwriting The process of analyzing a deal to decide whether it meets your investment criteria. Includes reviewing income, expenses, market data, and risk factors before making an offer or lending money.

V

Vacancy Rate The percentage of time a rental unit is unoccupied. If a property sits vacant for one month per year, the vacancy rate is 8.3%. Always factor vacancy into your cash flow analysis — even in strong markets, turnover happens.

W

Wholesaling Finding distressed properties, putting them under contract below market value, and selling that contract to another investor for an assignment fee — without ever closing on the property yourself. Full guide →

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Next Steps

• Browse the full Real Estate Glossary
• Start with House Hacking if you're new to investing
• Learn to Calculate Cash Flow before you analyze any deal