Trading Glossary

What is Cap Rate? (Capitalization Rate)

Cap rate (capitalization rate) is a key metric for valuing income-producing real estate. Learn the formula, what counts as a good cap rate, and how to use it.

What is Net Operating Income (NOI) in Real Estate?

Net Operating Income (NOI) is the annual income a property generates after operating expenses but before debt service. Learn how to calculate it and why it matters.

What is Loan-to-Value Ratio (LTV)?

Loan-to-value (LTV) ratio compares your mortgage balance to the property value. It determines your interest rate, PMI requirement, and maximum borrowing power.

What is Amortization? How Mortgage Amortization Works

Amortization is the process of paying off a loan through regular payments. Learn how amortization schedules work and why early payments are mostly interest.

What is Debt-to-Income Ratio (DTI)?

Debt-to-income ratio compares your monthly debt payments to your gross monthly income. Lenders use it to determine how much mortgage you qualify for.

What is Rental Yield?

Rental yield measures the annual return on an investment property as a percentage of its value. Learn the difference between gross and net yield and how to use them.

What is Cash-on-Cash Return?

Cash-on-cash return measures annual pre-tax cash flow against the cash you invested. Learn the formula, how it differs from cap rate, and what a good CoC return looks like.

What is After Repair Value (ARV)?

After Repair Value (ARV) is the estimated market value of a property after renovations. Learn how to calculate it using comps and apply the 70% rule for fix-and-flip deals.

What is Gross Rent Multiplier (GRM)?

Gross Rent Multiplier (GRM) is a quick metric to screen rental properties by dividing purchase price by annual gross rent. Learn the formula, benchmarks, and its key limitations.

What Are Mortgage Points (Discount Points)?

Mortgage discount points let you pay upfront to lower your interest rate. Learn how points work, the typical rate reduction per point, and how to calculate your break-even period.

What is Principal in a Mortgage?

Principal is the original loan amount you borrow. Learn how principal and interest split each payment, how amortization works over time, and how extra payments accelerate payoff.

What is Escrow in Real Estate?

Escrow appears in two contexts in real estate: as a neutral third party holding funds during a home purchase, and as a lender-managed account for taxes and insurance payments.

What is an HOA (Homeowners Association)?

A Homeowners Association (HOA) manages common areas and enforces community rules. Learn what HOA fees cover, typical costs, how they affect affordability, and what to watch out for.

What is Depreciation in Real Estate?

Real estate depreciation is a tax deduction that lets investors write off a property's cost over 27.5 years. Learn how it works, what qualifies, and how depreciation recapture affects your sale.

What is a 1031 Exchange?

A 1031 exchange lets real estate investors defer capital gains taxes by reinvesting sale proceeds into a like-kind property. Learn the rules, timelines, and how to use it strategically.

What is Refinancing a Mortgage?

Refinancing replaces your existing mortgage with a new one, ideally at a lower rate or better terms. Learn the types of refinances, break-even calculation, and when refinancing makes sense.

What is Home Equity?

Home equity is the portion of your property value you own outright — market value minus mortgage balance. Learn how equity builds, how to access it, and how LTV limits what you can borrow.

What Are Closing Costs?

Closing costs are fees paid at settlement when buying or selling a home. Learn what buyer and seller closing costs include, typical percentages, and strategies to reduce what you owe.

What is Cash Flow in Real Estate?

Cash flow is the money left over after collecting rent and paying all expenses including the mortgage. Learn how to calculate it, the 50% rule shortcut, and why it matters more than appreciation.

What is Property Appreciation?

Property appreciation is the increase in a home's value over time. Learn the historical US average, the difference between forced and market appreciation, and how leverage amplifies returns.

What is a Down Payment?

A down payment is the upfront cash you pay toward a home purchase. Learn about typical percentages by loan type, the impact on PMI and interest rate, and how to maximize your down payment.

What is Title Insurance?

Title insurance protects homeowners and lenders from undiscovered defects in a property's ownership history. Learn the two types of policies, what they cover, and why they are required.

What is a Real Estate Appraisal?

A real estate appraisal is a licensed professional's opinion of a property's market value. Learn when appraisals are required, how appraisers determine value, and what to do if yours comes in low.

What is House Hacking?

House hacking is the strategy of buying a property to live in while renting out part of it to offset your housing costs. Learn the best strategies, tax benefits, and how to analyze a deal.

What is the BRRRR Method in Real Estate?

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat — a strategy to recycle your capital across multiple properties. Learn how each step works, seasoning requirements, and how to model returns.

What is Vacancy Rate in Real Estate?

Vacancy rate is the percentage of time or units in a property that generate no rental income. Learn how to use it in cash flow analysis, national averages, and its impact on yield.