Real Estate Investor Terminology Part 1

• As-Is: A property that is stated “as-is” indicates that the seller is not performing any repairs.

• ROI: Return on investment (ROI) refers to the measurement of the net profit of an investment property, relative to its total cost. A high ROI indicates favorable yields for the investor.

• Comps: Investors, agents, and lenders alike find it useful to identify comparable properties or "comps." These "comps" are homes in close proximity (typically within .5 miles) to the subject property that have similar characteristics. The act of conducting this research is referred to as a comparative market analysis (CMA).

• LTV: Loan-to-value (LTV) is a ratio utilized by lenders to measure the amount of the loan relative to the value of a property. Lenders often show preference to properties with lower LTVs ratios by offering lower interest rates. Buyers can lower the ratio by making a larger down payment.

• Closing: A meeting at which a buyer and seller finalize a real estate transaction. Both the buyer and seller are required to fill out legal paperwork to officially transfer ownership of the property in question at the time of closing.

• Closing Costs: At the time of closing, a buyer should expect to pay 2-5% of the property’s purchase price to cover various fees, such as excise tax, processing fees, title insurance, etc.

• Exit Strategy: An exit strategy is how an investor plans to cash out on an investment property. This can include strategies such as renting out a buy-and-hold property or selling a rehabbed property.

• Carrying Costs: When an investor purchases a property to rehab, they must factor carrying costs into their list of expenses. These are the expenses incurred from the time the property is purchased until the time that it is sold, including interest payments, taxes, insurance and utilities.