Key Terms

Acquisition Fee
A fee charged for identifying, evaluating, and purchasing a property, typically paid to the acquisition team or firm.

Apartment Syndication
A partnership structure where multiple investors pool their capital to acquire and manage a multifamily property.

Appreciation
The increase in a property’s value over time due to market conditions, improvements, or other factors.

Capital Expenditures (CapEx)
Expenses related to acquiring, upgrading, or improving property assets, such as renovations or major repairs.

Capital Reserves Account
A fund set aside to cover future capital expenditures or unexpected repairs and improvements.

Cash Flow
The net amount of cash generated by a property after all operating expenses and debt service have been paid.

Cash-On-Cash (COC)
The return on an investment based on the cash flow received relative to the initial cash invested.

Closing Costs
Expenses incurred during the finalization of a real estate transaction, including legal fees, title insurance, and recording fees.

Concessions
Discounts or incentives offered to tenants to attract and retain them, such as free rent or reduced fees.

Debt Service
The total amount of principal and interest payments made on a loan over a specified period.

Debt Service Coverage Ratio (DSCR)
A financial ratio that measures a property’s ability to cover its debt service with its operating income, calculated as NOI divided by debt service.

Economic Vacancy
The percentage of income lost due to vacancies and tenant turnover, reflecting the impact on cash flow.

Equity Investment
The amount of money invested by partners or shareholders in a property, representing ownership interest.

Equity Multiplier (EM)
A ratio that measures the amount of equity used to generate revenue, calculated as total assets divided by equity.

Financing Fees
Costs associated with securing a loan, such as origination fees, underwriting fees, and loan processing fees.

General Partner (GP)
The individual or entity responsible for managing the day-to-day operations of a syndication, making investment decisions, and handling property management.

Gross Potential Income
The total income a property could generate, including all potential rent and additional income sources, before deductions for vacancies or other losses.

Gross Potential Rent (GPR)
The total rental income a property could generate if fully occupied at current market rates.

Gross Rent Multiplier (GRM)
A valuation metric calculated by dividing the property’s purchase price by its gross rental income.

Internal Rate Of Return (IRR)
A metric used to evaluate the profitability of an investment, representing the annualized rate of return over the life of the investment.

Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount.

Interest-Only Payment
A type of loan payment where only the interest is paid for a certain period, with the principal repaid later.

London Interbank Offered Rate (LIBOR)
A benchmark interest rate at which major global banks lend to one another, used as a reference for various financial products.

Loss To Lease (LtL)
The difference between the market rent and the actual rent being collected due to below-market lease agreements.

Market Rent
The average rental rate for similar properties in the same area.

Metropolitan Statistical Area (MSA)
A geographic region defined by the U.S. Census Bureau, used for statistical analysis of economic and demographic data.

Model Unit
A representative apartment unit used to showcase the property’s features and finishes to potential tenants.

Net Operating Income (NOI)
The total income generated from a property minus its operating expenses, excluding debt service and taxes.

Operating Expenses
Regular costs associated with managing and maintaining a property, including utilities, property management fees, and maintenance costs.

Price Per Unit
The cost of a property divided by the number of rental units it contains.

Prepayment Penalty
A fee charged for paying off a loan before its scheduled maturity date.

Preferred Return
A specified rate of return that investors are entitled to receive before any profits are distributed to other equity holders.

Private Placement Memorandum (PPM)
A document provided to potential investors that outlines the terms, risks, and details of an investment opportunity.

Pro-Forma
A financial projection or forecast used to estimate the future performance of a property or investment.

Property And Neighborhood Classes
Classification of properties and neighborhoods based on various factors such as location, condition, and amenities, used to assess value and investment potential.

Property Management Fee
A fee charged for the day-to-day management and maintenance of a property, including tenant relations and rent collection.

Refinance
The process of obtaining a new loan to replace an existing one, often to take advantage of better terms or lower interest rates.

Refinancing Fee
A fee charged for arranging a new loan to replace an existing one, often to secure better terms or conditions.

Residential Utility Billing System (RUBS)
A system used to allocate utility costs among tenants based on usage or other factors, often used in multifamily properties.

Sales Proceeds
The amount received from the sale of a property, minus any costs associated with the sale.

Sophisticated Investor
An individual with substantial experience and knowledge in financial and business matters, enabling them to assess the risks and merits of an investment, even if they do not meet the accredited investor criteria.

Subject Property
The specific property being discussed or evaluated for investment.

Subscription Agreement
A contract between an investor and an investment fund or syndication, outlining the terms of the investment and the investor’s commitment.

Underwriting
The process of evaluating and assessing the risks and potential returns of a property or investment opportunity.

Vacancy Loss
The income lost due to unoccupied rental units.

Vacancy Rate
The percentage of rental units that are unoccupied at a given time.

Value-Add Plays
Specific opportunities to increase cash flow and property value, such as improving curb appeal, addressing mismanagement, or adjusting rents.

Value-Add Strategy
A method of increasing a property's value through various improvements and optimizations to generate higher returns.