Real Estate Investing Glossary
15 essential terms every rental property investor needs to know. Each definition includes the formula, what to target, and links to deeper guides and calculators.
NOI
NOI (Net Operating Income)
Net Operating Income is the total income a rental property generates minus all operating expenses, but before mortgage p...
DSCR
DSCR (Debt Service Coverage Ratio)
Debt Service Coverage Ratio measures whether a property's income can cover its debt payments. A DSCR of 1.0 means income...
Cap Rate
Cap Rate (Capitalization Rate)
Capitalization Rate measures a property's return independent of financing. It strips away mortgages and down payments to...
LTV
LTV (Loan to Value Ratio)
Loan to Value shows how leveraged a property is. Higher LTV means more debt relative to value which increases risk but c...
CoC
Cash on Cash Return
Cash on Cash Return measures the annual return on the actual cash you invested in a property. Unlike cap rate which igno...
ARV
ARV (After Repair Value)
After Repair Value is the estimated market value of a property after all renovations are complete. This is the most crit...
GRM
GRM (Gross Rent Multiplier)
Gross Rent Multiplier is a quick screening tool that compares a property's price to its annual gross rent. Lower GRM mea...
Vacancy
Vacancy Rate
Vacancy Rate is the percentage of time a rental property sits empty and not generating income. Every vacant day costs yo...
Forced Appreciation
Forced Appreciation
Forced appreciation is when you increase a property's value through renovations, improvements, or increasing rental inco...
House Hacking
House Hacking
House hacking is living in one unit of a multi-unit property while renting the other units to cover your mortgage. It is...
Subject To
Subject To Financing
Subject To is a creative financing strategy where you purchase a property subject to the existing mortgage staying in pl...
Seller Financing
Seller Financing
Seller financing is when the property seller acts as the lender instead of a bank. The buyer makes monthly payments dire...
1031 Exchange
1031 Exchange
A 1031 Exchange allows you to defer all capital gains taxes when selling an investment property by reinvesting the proce...
Depreciation
Rental Property Depreciation
Depreciation is a non-cash tax deduction that lets you write off the cost of your rental building over 27.5 years. This ...
Debt Service
Debt Service
Debt service is the total amount of mortgage payments you make on a property in a year. It includes both principal and i...