Real Estate Investing Glossary

Plain-English definitions for the terms used across SFRCalc's calculators and articles. Where a term has a full breakdown elsewhere on the site, it's linked below.

ARV — After Repair Value

What a property is expected to be worth once planned rehab work is complete. Central to flip and BRRRR math, since it sets the ceiling for how much rehab spend actually makes sense.

Amortization

The schedule by which a loan's principal is paid down over its term. Early payments are mostly interest; later payments are mostly principal, even though the total payment stays the same on a fixed-rate loan.

Appreciation

An increase in a property's value over time, from market conditions ("market appreciation") or from work done to the property ("forced appreciation," e.g. a renovation that raises rent and therefore value).

BRRRR — Buy, Rehab, Rent, Refinance, Repeat

A strategy for recycling the same capital across multiple purchases: buy below market, rehab to raise the value and rent, refinance based on the new appraised value to pull cash back out, then repeat. See the full breakdown.

Cap Rate — Capitalization Rate

Net operating income divided by property value — a measure of return that ignores financing entirely, useful for comparing properties on an apples-to-apples basis regardless of how each is financed. See how it differs from cash-on-cash return.

CapEx — Capital Expenditures

Spending on big-ticket items that wear out over years, not months — a roof, HVAC system, water heater. Modeled as a reserve (a percentage of rent set aside monthly) since these costs are real but irregular.

Cash Flow

What's left from rental income after every expense is paid, including the mortgage — the actual cash a property puts in (or takes out of) your pocket each month.

Cash-on-Cash Return

Annual cash flow divided by the actual cash invested (down payment, closing costs, rehab) — a measure of return that accounts for financing, unlike cap rate. See how it differs from cap rate.

Closing Costs

Fees paid to finalize a purchase beyond the price itself — lender fees, title insurance, recording fees, prepaid taxes/insurance, and similar. Typically higher as a percentage of price on a financed deal than a cash deal.

DSCR — Debt Service Coverage Ratio

Net operating income divided by the annual mortgage payment — the ratio DSCR lenders use to qualify a loan off the property's own rent instead of the borrower's personal income. See the full breakdown.

DTI — Debt-to-Income Ratio

Monthly debt payments divided by monthly income — a standard conventional-lending metric based on the borrower personally, not the property. This is what DSCR loans are designed to sidestep.

Equity

The portion of a property's value you actually own — current market value minus the remaining loan balance. Builds through paydown of the loan, appreciation, or both.

Escrow

Two different uses: (1) a neutral third party holding funds/documents during a transaction until closing conditions are met, and (2) a lender-held account that collects a portion of property taxes and insurance monthly and pays them on your behalf when due.

Fix & Flip

Buying a property, renovating it, and reselling it for a profit in a relatively short window — a strategy built on the spread between purchase-plus-rehab cost and resale value, not on holding for rental income.

GRM — Gross Rent Multiplier

Purchase price divided by annual gross rent. A quick, rough screening ratio — unlike cap rate, it ignores expenses entirely, so it's a starting filter, not a substitute for full underwriting.

HOA — Homeowners Association

A mandatory fee charged by a property's homeowners or condo association for shared maintenance, amenities, and reserves — a fixed monthly or annual operating expense that doesn't scale with rent.

House Hacking

Living in one unit of a property (commonly a duplex/triplex/fourplex, or a single-family home with a rentable room) while renting out the rest — often unlocks owner-occupant financing terms not available to a pure investment purchase. See the full guide.

LTV — Loan-to-Value Ratio

Loan amount divided by the property's value — an 80% LTV loan on a $300,000 property is a $240,000 loan. Lower LTV (a bigger down payment) generally means better loan terms and lower risk to the lender.

NOI — Net Operating Income

Rental income minus operating expenses (taxes, insurance, HOA, management, maintenance, vacancy) — but before the mortgage payment. The foundation both cap rate and DSCR are built on.

PITI — Principal, Interest, Taxes, Insurance

The four components most often bundled into a single monthly mortgage payment. Some lenders add a fifth for HOA dues (sometimes written PITIA).

Points — Discount Points

An upfront fee paid to the lender at closing (1 point = 1% of the loan amount) in exchange for a lower interest rate over the life of the loan — a trade of cash now for a lower payment later.

Rehab

Renovation or repair work done to a property, whether cosmetic (paint, flooring) or structural/systems-level (roof, plumbing, electrical). Rehab budgets and timelines are usually the single biggest source of overrun risk in a flip or BRRRR deal.

Turnkey

A property marketed as move-in or rent-ready with no work needed — often already tenanted and professionally managed. Convenient, but usually priced at a premium that reduces the margin available compared to a value-add purchase.

Vacancy Rate

The share of time a rental unit sits unoccupied and not producing income, typically modeled as a percentage reserve against gross rent. See why a 5% reserve is a long-run average, not what one turnover actually costs.

Wholesaling

Contracting to buy a property, then selling that contract (or immediately reselling the property) to another buyer for a fee, without ever taking long-term ownership. See assignment vs. double close for how the mechanics differ.

Yield — Rental Yield

Annual rental income as a percentage of property value or purchase price — a quick income-focused measure, related to but not the same as cap rate (which nets out expenses) or cash-on-cash return (which accounts for financing).