The terms, plainly defined.
Every term we use across our programs, guides, and calculators, in plain English.
After-Repair Value (ARV)
The estimated market value of a property after planned renovations are complete. Lenders size fix-and-flip and BRRRR loans off ARV, and the 70% rule uses it to set a maximum offer.
Amortization
The schedule by which a loan is paid down over time. A 30-year amortization spreads principal and interest across 360 monthly payments, even if the loan has a shorter term or a balloon.
Bridge Loan
Short-term financing that 'bridges' a gap, for example buying a new property before selling another, or holding an asset while you reposition it for permanent financing.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat. A strategy where you force value through renovation, refinance based on the higher value to recover your capital, and roll it into the next deal.
Business-Purpose Loan
A loan made for investment or commercial use rather than for a home you live in. What makes a loan business-purpose is how the money is used, buying, improving, or refinancing income property, not the entity that borrows or the property type on its own. Business-purpose loans sit outside the consumer mortgage rules.
Cap Rate
Capitalization rate: a property's net operating income divided by its price, expressed as a percentage. The unlevered yield, used to compare rentals independent of financing.
Cash-on-Cash Return
Annual pre-tax cash flow divided by the actual cash you invested. Unlike cap rate, it reflects your financing and down payment.
Cash-Out Refinance
Replacing an existing loan with a larger one and taking the difference in cash. The proceeds are generally not taxable because they are debt, not income; confirm with your tax advisor.
Debt-Service Coverage Ratio (DSCR)
A rental's monthly rent divided by its full monthly payment (principal, interest, taxes, insurance, HOA). A DSCR of 1.0 means rent exactly covers the payment; lenders usually want 1.0 or higher.
Documentary Stamp Tax
A state tax on recorded documents, charged as a rate per $100 of the deed price or the mortgage amount. Several states levy one, Florida among them. It is a closing-table cost rather than an annual one, and on a double close it applies to each recorded leg.
Draw Schedule
On a rehab or construction loan, the plan for releasing renovation funds in stages as work is completed and inspected, rather than all at once up front.
Hard Money Loan
Short-term, asset-based financing secured by the property rather than the borrower's income. Priced on speed and the deal, typically interest-only, used for flips and bridges.
Impact Fee
A one-time charge a local government levies on new construction to fund the roads, parks, schools, and utilities that new units draw on. Fees are set per jurisdiction and per unit type, so two lots a few miles apart can carry very different numbers. Treat it as a hard cost in a ground-up budget.
Interest-Only
A loan where the monthly payment covers only interest, with the full principal due at the end of the term (at sale or refinance). Common on hard money loans.
Loan-to-Cost (LTC)
The loan amount as a percentage of the total project cost (purchase plus rehab). A lender funding 90% LTC covers 90% of your all-in cost.
Loan-to-Value (LTV)
The loan amount as a percentage of the property's value (or ARV). Caps how much you can borrow against a property and how much you can pull out on a refinance.
Millage
A property tax rate expressed in mills, where one mill is one dollar per $1,000 of assessed value. A 20-mill rate works out to 2% of assessed value. Local governments stack several millages, county, city, school district, and special districts, into the single rate a parcel actually pays.
Net Operating Income (NOI)
A property's effective gross income minus operating expenses, before debt service. The numerator in the cap-rate calculation.
No-Doc / Bank-Statement Loan
A loan that qualifies a borrower on the property's cash flow or bank deposits instead of tax returns and W-2 income. Useful for self-employed investors.
Non-Owner-Occupied
A property the owner does not live in. Investment financing is written on non-owner-occupied property, and the classification usually costs you the homestead exemption and any owner-occupancy cap on assessed value, which is why the tax bill often jumps the year after a purchase.
Points
An up-front origination fee expressed as a percentage of the loan. Two points on a $300,000 loan is $6,000, paid regardless of how long you hold the loan.
Portfolio / Blanket Loan
A single loan secured by multiple properties, letting an investor finance or refinance a group of rentals under one instrument instead of many separate loans.
Prepayment Penalty
A fee for paying a loan off early, usually inside the first few years and often stated as a percentage that steps down over time. It protects the lender's expected yield. If you plan to sell or refinance quickly, the prepay structure can matter as much as the rate.
Private Money
Capital from a private lender or fund rather than a bank. Like hard money, it is relationship- and asset-based, often with more flexible, faster decisions.
Proof of Funds (POF)
Documentation showing a buyer has the capital or financing to close. Sellers and wholesalers often require it before accepting an offer.
Real Estate Excise Tax (REET)
A tax on the sale of real property, charged as a percentage of the sale price and paid at closing. Washington is where investors meet it most often, with a graduated state rate stacking on top of a local rate set by the city or county. On a double close it applies to each recorded sale.
Release Provision
A clause in a blanket or portfolio loan that lets you sell one property out of the pool and clear its lien without retiring the whole loan. The provision sets what has to be paid down to release a door. Without one, selling a single property means unwinding the entire loan.
Seasoning
The length of time you must own a property (or hold funds) before a lender will use its new value or those funds. Affects how soon you can refinance after a rehab.
70% Rule
A flipping guideline: pay no more than 70% of ARV minus rehab costs. It builds in margin for holding costs, selling costs, and profit.
Tax Code Area (TCA)
The geographic zone that determines which overlapping taxing districts a parcel sits inside, and therefore its total property tax rate. Two houses on opposite sides of a street can fall in different tax code areas and pay meaningfully different rates on the same assessed value.
Transactional Funding
Very short-term capital that funds a same-day 'double close,' letting a wholesaler buy and resell a property back-to-back without using their own cash.
Want the deeper version? Read the investor guides or run the numbers with our calculators.
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