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ARV – CAP RATE – HUD – MLS – NNN – REO – OWC – ETC…

Real estate investors, brokers and agents are as guilty as any other industry practitioners at using jargon and abbreviations that seem commonplace to us, but are often confusing to our clients and customers. As a reminder to slow down and explain these important terms and concepts, especially to new clients, here is a list of the most common jargon and simple explanations:

• ARV – After-Repaired Value. The estimated resale or new appraisal value of a property after remodeling or repairs are complete.
• CMA – Comparative Market Analysis.  A report run by a real estate professional to estimate the value of a property for a listing.
• CAP  (Cap Rate) = Capitalization Rate.  A measure of the quality of an income property investment based on income and expenses expressed as a ratio. (NOI/COST=CAP)
• COCR – Cash on Cash Return.  A simple calculation of the return on initial cash invested relative to annual cash flow. (cash flow/initial investment).
• DBA – Doing Business As.   Business name registered as ancillary to the actual entity or person filing taxes or bank account deposits.
• DOT – Deed of Trust.  Document filed by a lender to publicly show proof of loan or lien on real property.
• FHA – Federal Housing Administration. The federal agency in the Department of Housing and Urban Development that insures residential mortgages.
• HOA – Homeowners Association.  A group that governs a subdivision, condominium or planned community or other real estate with a common purpose.
• HUD – Housing and Urban Development.  The United States federal department that administers federal programs dealing with housing.
• I/O- Interest Only (loan). A type of loan amortization in which the principal balance of the loan neither increases nor decreases.
• IRR – Internal Rate of Return.  The average annual compound rate of return received by an investor over the life of their investment.
• L/O – Lease Option.  A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.
• LLC – Limited Liability Company.  A legal structure for businesses which is designed to combine attributes of corporate and partnership structures.
• LOI – Letter of Intent.  A document outlining an agreement between two or more parties before the agreement is finalized.
• LTC – Loan to Cost.  The ratio of the price paid for a property to amount of the loan used to finance the purchase.  Often used to calculate a purchase AND repair or build costs.
• LTV – Loan to Value.  The amount of money being loaned (borrowed) against the appraised value.

• MLS – Multiple Listing Service. Local or regional service that compiles available real estate for sale by member brokers including detailed information, generally computerized and online.
• NNN – Triple Net Lease.  A lease in which, in addition to the rent, the tenant is required to pay for property taxes, insurance and maintenance.
• NOI – Net Operating Income.  Annual income after all expenses (property taxes, ins., & maintenance) except debt service (mortgage payment).
• NOO – Non-Owner Occupied.  Homes that are acquired specifically for investment purposes, also a type of loan for investment property.
• OWC – Owner Will Carry (owner financing).  A type of financing in which the seller accepts a promissory note as a portion of the purchase price. Also called owner or seller financing.
• PITI – Principal, Interest, Taxes and Insurance.   The total monthly payment a borrower makes to the lender.  If private mortgage insurance is required, that will be included in the amount as well.
• PMI – Private Mortgage Insurance.  Insurance paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-To-Value Ratio is greater than 80%.
• POA – Power of Attorney.  A written authorization to an agent to perform specified acts on behalf of his principal, usually to sign closing documents. This may be granted as either a general or a limited power.
• POF – Proof of Funds. A document by which the principal’s bank states that the principal owns the funds required for the transaction.
• REO – Real Estate Owned. REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.
• ROI – Return On Investment.  A measure used to evaluate the quality of an investment or to compare different investments. Return/Cost expressed as a percentage or a ratio.
• SFR – Single Family Residence.  A standard home with no common areas, or sharing of common walls intended to be occupied by 1 family.