Glossary Terms

ALL A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
  • Acquisition Cost
    Acquisition cost refers to the total expenses incurred in acquiring a property or investment, including purchase price, closing costs, fees, and any other costs directly associated with the acquisition process.
  • Affordable Housing
    Affordable housing typically refers to housing options designed to be affordable for individuals or families with low to moderate incomes. It is generally defined as housing on which the occupant is paying no more than 30 percent of gross income for ...
  • Allocation
    Allocation refers to the distribution or assignment of resources, funds, or assets to different categories or purposes. In real estate investing, allocation can refer to the division of investment capital among various asset classes, geographic ...
  • Alternative Investments
    Alternative investments encompass a diverse range of investment opportunities that differ from what many may consider traditional investments like stocks and bonds. Examples include real estate, private equity, venture capital, hedge funds, ...
  • Anchor Tenant
    An anchor tenant is a prominent, well-known tenant occupying a large portion of leased space within a commercial property or shopping center. They are typically major retailers or businesses that attract significant foot traffic and may act as a ...
  • Ancillary Tenant
    An ancillary tenant refers to a secondary or supporting tenant within a commercial property or shopping center. They typically occupy smaller spaces and benefit from the foot traffic generated by the anchor tenant.
  • Appraisal
    An appraisal is a professional assessment or estimation of the value of a property, typically conducted by a licensed appraiser. Appraisals take into account various factors such as the property's condition, location, comparable sales, and market ...
  • Appraised Value
    Appraised value is the estimated value of a property determined through an appraisal process. It represents the professional appraiser's opinion of the property's fair market value based on factors such as its condition, location, comparable sales, ...
  • Appreciation
    Appreciation refers to the increase in value of an asset over time. In real estate investing, appreciation typically refers to the increase in the value of a property due to factors such as market conditions, demand, improvements, or other economic ...
  • Asset Class
    An asset class refers to a group of financial instruments or investments that share similar characteristics and behavior in the marketplace. Common asset classes in commercial real estate investing include multifamily, industrial, office, retail, ...
  • Assets Under Management (AUM)
    Assets under management (AUM) refers to the total market value of investments or assets that a financial institution, investment manager, or fund oversees on behalf of clients or investors. In real estate, AUM can include the value of properties, ...
  • Basis Point
    A basis point is a unit of measurement commonly used in finance and investing to represent a percentage change. One basis point is equal to 0.01%, or one-hundredth of a percentage point. As an example, a 5% change would equate to 500 basis points.
  • CAGR
    CAGR stands for Compound Annual Growth Rate. It is a measure of the average annual growth rate of an investment or asset over a specific period, taking into account the compounding effect of returns or losses over time.
  • Capital
    Capital refers to financial resources or assets used for investment purposes, such as funds available for investing in real estate properties or businesses. Equity and debt are forms of capital typically used to fund commercial real estate projects. ...
  • Capital Gain
    A capital gain refers to the profit realized from the sale or disposition of a capital asset, such as real estate or stocks. It is calculated by subtracting the original purchase price, or cost basis, from the sale price.
  • Capital Gains Tax
    Capital gains tax is a tax imposed on the profits or gains generated from the sale or disposition of a capital asset, such as real estate or stocks. The tax rate may vary depending on factors such as the holding period of the asset and the ...
  • Capital Stack
    The capital stack refers to the various sources of capital, including debt and equity, used to finance a real estate project or investment. It represents the different layers or levels of funding and their priority of repayment in the event of a ...
  • Capitalization Rate (Cap rate)
    Capitalization rate, commonly known as cap rate, is a measure used in real estate to estimate the potential return on an investment property. It is calculated by dividing the property's net operating income (NOI) by its purchase price or value. ...
  • Cash Flow
    Cash flow refers to the net amount of cash generated or received from an investment or business after deducting all expenses, operating costs, and debt obligations. (removed "In real estate investing, positive cash flow indicates that the property's ...
  • Cash-on-cash Return
    Cash-on-cash return calculates the cash income earned on the cash invested in a property. It’s sometimes also referred to as the cash yield.
  • Closing Costs
    Closing costs are the fees, charges, and expenses associated with the purchase or sale of a property. These costs typically include expenses such as title insurance, appraisal fees, attorney fees, loan origination fees, and other charges related to ...
  • Collateral
    Collateral refers to an asset or property that is pledged as security for a loan or debt. In the event of default, the lender can seize and sell the collateral to recover the amount owed. Real estate properties are commonly used as collateral for ...
  • Commercial Property
    Commercial property refers to real estate properties that are used for commercial purposes, such as office buildings, retail centers, industrial facilities, or multifamily apartment complexes. Commercial properties are often used for business or ...
  • Commercial Real Estate (CRE)
    Commercial real estate, often abbreviated as CRE, refers to properties used for commercial purposes, including office buildings, retail centers, hotels, industrial facilities, and multifamily apartment complexes. CRE encompasses properties intended ...
  • Compound Interest
    Compound interest refers to the interest that is calculated not only on the initial principal amount but also on the accumulated interest from previous periods. It allows investments or debts to grow at an increasing rate over time, taking into ...
  • Contingent Offer
    A contingent offer is a purchase offer for a property that is dependent on certain conditions or contingencies being met. These contingencies often include inspections, financing, or the sale of the buyer's current property. If the contingencies are ...
  • Core
    Existing assets generally with little need for capital improvements, typically in major metros, with high occupancy, longer weighted average lease term (WALT), creditworthy tenants, and rents near or above market rate.
  • Core Plus
    Core plus is a real estate investment strategy that generally involves the acquisition of existing properties with typically attractive occupancy rates, but with the potential to increase cash flow or property value through light improvements, ...
  • Debt
    Debt refers to money borrowed or owed by an individual, company, or entity. In real estate investing, debt is commonly used to finance the purchase or development of properties, with the borrower agreeing to repay the principal amount plus interest ...
  • Debt Service
    Debt service refers to the regular payments made by a borrower to repay the principal amount and interest on a loan. In real estate, debt service typically refers to the mortgage payments made by property owners to service their mortgage debt.
  • Default
    Default occurs when a borrower fails to fulfill their financial obligations or comply with the terms of a loan or agreement. In real estate, default typically refers to the failure to make mortgage payments, which can lead to foreclosure and the ...
  • Delinquent
    Delinquent refers to a borrower who fails to make timely payments on a loan or fulfill their financial obligations. In real estate, delinquent borrowers are typically those who are behind on their mortgage payments, which can lead to foreclosure ...
  • Demographics
    Demographics refers to the characteristics of a population or a specific group within a population, such as age, gender, income, education level, or household size. In real estate, demographic data is often used to analyze market trends, target ...
  • Depreciation
    Depreciation refers to the decline in value of an asset over time due to wear and tear, obsolescence, or other factors. In real estate investing, depreciation is generally a tax deduction that can allow property owners to account for the gradual ...
  • Development
    Development in real estate refers to the process of converting raw land or underutilized properties into improved properties. It generally involves activities such as planning, zoning, design, construction, and marketing to create new buildings, ...
  • Distressed Property
    Distressed property refers to real estate that is in poor physical condition or facing financial difficulties, such as foreclosure, bankruptcy, or default. These properties are often sold at a discount compared to similar properties in better ...
  • Distributions
    Distributions, in real estate investing, refer to the periodic payments or dividends distributed to investors or partners based on the profits, income, or cash flows generated by a real estate investment or partnership. It's important to note, ...
  • Diversification
    Diversification is a rconcentration risk management strategy that involves spreading investments across different assets, markets, or investment types to reduce exposure to any single investment and help minimize risk.
  • Downside Protection
    Using techniques in an effort to prevent a decrease in the value of the investment. It is a common objective of investors and fund managers to avoid losses and many instruments can be used to achieve this objective.
  • Due Diligence
    Due diligence refers to the process of conducting a comprehensive and thorough investigation or examination of a property, investment, or business before making a decision or entering into a transaction. It can involve verifying information, ...
  • Entity
    In real estate, an entity refers to a legal structure, such as a corporation, limited liability company (LLC), partnership, or trust, used to hold or own real estate properties. Entities are often created to protect the property owner's personal ...
  • Equity
    Equity in real estate refers to the ownership interest or value that an owner or investor holds in a property after deducting any outstanding debts or liabilities. It represents the residual value or net worth of the property owner's investment.
  • Equity Multiple
    Equity multiple is a financial metric that measures the total return on an investment relative to the initial investment.
  • Fair Market Value
    Fair market value refers to the estimated price at which a property would change hands between a willing buyer and a willing seller, both having reasonable knowledge of the property and neither being under compulsion to buy or sell. It represents ...
  • General Partner
    A general partner is an owner of a partnership who has unlimited liability. They are usually a managing partner and are active in daily business operations.
  • Hold Period
    In commercial real estate, the hold period is the time between when the investment is made and when the property sells.
  • Hotel
    The main type of property within the hospitality moniker is hotels. Hotels are defined primarily by the services and amenities that they offer, but also by the “flag” or operating brand of the property.
  • Industrial
    Industrial refers to a category of commercial real estate focused on properties used for manufacturing, production, storage, and distribution of goods. These properties are critical to supply chain and logistics operations and typically include ...
  • Investing Entity
    In commercial real estate an investing entity is the vehicle that makes an investment in a commercial real estate offering.
  • IRR
    Internal Rate of Return (IRR) is a financial metric used in commercial real estate to measure the profitability of an investment over time. It represents the discount rate at which the net present value (NPV) of all cash flows from the ...
  • Leverage
    Leverage is the use of various financial instruments or borrowed capital to purchase and/or enhance the potential return of an investment. In commercial real estate, leverage typically involves borrowing funds—such as through loans or mortgages—to ...
  • Limited Partner
    A limited partner is a business partner whose liability is limited to the amount of their investment in the company.
  • LTV
    Loan-to-value ratio (LTV) is calculated by dividing the loan amount over the appraised property value.
  • Market Value
    Market value is the price an asset would fetch in the public marketplace.
  • Multifamily
    Multifamily refers to a category of commercial real estate comprising residential properties designed to accommodate multiple separate housing units within a single building or complex. These properties include apartments, condominiums, townhomes, ...
  • NOI
    Net operating income (NOI) equals all revenue from the property minus all operating expenses.
  • Office
    Office refers to a category of commercial real estate comprising properties designed to accommodate businesses and professional services. These spaces range from small, single-tenant buildings to large multi-tenant office towers and are classified ...
  • Opportunistic
    Project could require heavy redevelopment, full development, or repositioning to achieve it's business plan. (removed "reach its highest potential value")
  • Oversubscription
    A commercial real estate offering is “oversubscribed” when the investor funds offered exceed the total equity the sponsor was looking to raise.
  • Pari-passu
    A Latin phrase meaning “equal footing,” used to describe situations where two or more assets, securities, creditors or obligations are equally managed without preference.
  • Preferred Return
    As the name suggests, preferred return is a profit distribution preference whereby profits, either from operations, sale, or refinance, are distributed to one class of equity before another until a certain rate of return on the initial investment is ...
  • Real Estate Broker
    A real estate broker is a licensed professional or firm that facilitates real estate transactions between buyers and sellers, landlords and tenants, or investors and investment opportunities. Real estate brokers can represent either party in a ...
  • Real Estate Syndicate
    A real estate syndicate is a group of investors who pool their capital to buy or build property.
  • REIT
    A REIT (real estate investment trust) is a company that owns, operates or finances income-producing real estate. (removed "modeled after mutual funds")
  • Retail
    Retail property types range from single-tenant buildings, like a stand-alone pharmacy, to full shopping centers with dozens or even hundreds of tenants.
  • SDIRA
    A self-directed IRA (SDIRA) is when the investor is in charge of making all their own investment decisions and are not usually offered by traditional brokerage firms.
  • Self Storage
    Self-storage is a segment of commercial real estate consisting of facilities that provide rentable storage units for individuals and businesses. These properties cater to diverse needs, including storing personal belongings, business inventory, ...
  • Senior Housing
    Senior housing is a specialized sector of commercial real estate that provides residential facilities and care services tailored to the needs of older adults, typically aged 55 and above. These properties encompass a range of options, including ...
  • Sponsor
    In commercial real estate, the sponsor is an individual or company in charge of finding, acquiring, and managing the real estate property on behalf of the partnership.
  • Valuation
    Valuation is the process of determining the current worth of an asset or a company.
  • Value-Add
    Projects requiring significant investment, improvement, and oversight to achieve goals, likely including interior and exterior renovations, operational efficiencies, leasing risk, increasing undervalued rents, and the likelihood of higher leverage.
  • xIRR
    The xIRR is a way of calculating the IRR for a series of cash flows that may not be periodic by assigning specific dates to each individual cash flow. xIRR is a complicated calculation done in Excel or other financial modeling software. The main ...