Real estate investing glossary
The terms investors actually use, in plain English — with the formulas, ranges, and tradeoffs that matter.
1031 exchange
An IRS rule letting you defer capital-gains tax by rolling sale proceeds into another investment property.
Read moreCap rate
Net operating income divided by property price. The unlevered yield of a rental.
Read moreCash-on-cash return
Annual pre-tax cash flow divided by the cash you actually invested. The levered equivalent of cap rate.
Read moreDepreciation recapture
The tax owed on depreciation deductions when you sell — taxed up to 25% federal.
Read moreDSCR loan
An investor mortgage qualified on the property's cash flow instead of the borrower's W-2 income.
Read moreGross Rent Multiplier (GRM)
Purchase price divided by annual gross rent. A fast back-of-envelope screen.
Read moreNet Operating Income (NOI)
Gross rent minus vacancy and operating expenses. Excludes mortgage and income tax.
Read morePrice-to-rent ratio
Median home price divided by annual rent. A quick screen for whether a market is cash-flow or appreciation.
Read moreTenant screening
The process of evaluating applicants — credit, income, eviction history, references — before signing a lease.
Read moreVacancy rate
The percentage of time a unit sits unrented. Underestimating it is the most common pro-forma error.
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