Glossary

SHEEHY TEAM
INVESTMENT GLOSSARY
Addendum - Anv addlLlons LhaL accompanv a purchase conLracL, amendmenLs need Lo be
aareed upon Lo be valld.
Aer|a| V|ew - A plcLure of a properLv from Lhe alr, wheLher bv alrplane or bv saLelllLe LhaL
Lells: 1) saves a loL of Llme looklna aL a properLv ln person and shows Lhe nelahborhood,
2) verlfles Lhe sLaLe of Lhe properLv from anale vou can'L see drlvlna bv. 1hls ls especlallv
cruclal for ouL of Lown buvers.
Amort|zat|on 5chedu|e - A flnanclna re
balance pald, lnLeresL pald, and shows how lona and aL whaL cosL vou are Lo pav off vour
debL.
Appra|sa| - someLlmes used lnLerchanaeablv wlLh an assessmenL
documenL (ln mosL cases) LhaL ls Lhlrd
bv a professlonal and llcensed Appralser, Lhe bank wanLs Lo know can Lhe properLv cover
Lhe loan. 8ased on Lhree approaches lncome approach, replacemenL approach
Ass|gnee - 1he process dlsclosed ln Lhe
Lhe buver's represenLaLlve mav hlde Lhe buver's ldenLlLv
aL closlna. usuallv Lhls ls done ln Lhe case of a corporaLlon whlch lsn'L acLuallv an
lndlvldual.
Cap|ta| Ga|ns kates (or Cap|ta| Ga|ns)
CaplLal aaln has noLhlna Lo do wlLh flnanclna. ?ou musL also facLor ln depreclaLlon and
non-expensable lmprovemenLs.
Cap|ta| Improvements - SLrucLural lmp
Lhe properLv's overall value, appearance, or lncreases funcLlonallLv.
Cap|ta||zat|on kate - or Cap kate
lnLeresL raLe LhaL Lhls lnvesLmenL vlelds? lL
Lhe effecLlve reLurn on Lhe enLlre purchase prlce LhaL a properLv can aeneraLe.
Cash I|ow - Lhe amounL of cash LhaL vou have lefL over each monLh for a alven properLv
afLer all renL ls collecLed, all pro
morLaaae on Lhe properLv ls pald.
SHEEHY TEAM
INVESTMENT GLOSSARY
Anv addlLlons LhaL accompanv a purchase conLracL, amendmenLs need Lo be
A plcLure of a properLv from Lhe alr, wheLher bv alrplane or bv saLelllLe LhaL
loL of Llme looklna aL a properLv ln person and shows Lhe nelahborhood,
2) verlfles Lhe sLaLe of Lhe properLv from anale vou can'L see drlvlna bv. 1hls ls especlallv
A flnanclna re-pavmenL schedule LhaL shows vou vour prlnclple
balance pald, lnLeresL pald, and shows how lona and aL whaL cosL vou are Lo pav off vour
someLlmes used lnLerchanaeablv wlLh an assessmenL - a bank ordered
documenL (ln mosL cases) LhaL ls Lhlrd-parLv LhaL Lrles Lo puL value on Lhe properLv. uone
bv a professlonal and llcensed Appralser, Lhe bank wanLs Lo know can Lhe properLv cover
Lhe loan. 8ased on Lhree approaches lncome approach, replacemenL approach
1he process dlsclosed ln Lhe conLracL and aareed upon bv Lhe seller, ln whlch
Lhe buver's represenLaLlve mav hlde Lhe buver's ldenLlLv-who would assume Lhe properLv
aL closlna. usuallv Lhls ls done ln Lhe case of a corporaLlon whlch lsn'L acLuallv an
(or Cap|ta| Ga|ns) - Lhe proflL vou aeL above Lhe selllna prlce. 1he
CaplLal aaln has noLhlna Lo do wlLh flnanclna. ?ou musL also facLor ln depreclaLlon and
expensable lmprovemenLs.
SLrucLural lmprovemenLs or resLoraLlon LhaL wlll elLher enhance
Lhe properLv's overall value, appearance, or lncreases funcLlonallLv.
or Cap kate - Answers a slmple quesLlon: whaL ls Lhe effecLlve
lnLeresL raLe LhaL Lhls lnvesLmenL vlelds? lL ls a percenLaae whlch alves vou an esLlmaLe of
Lhe effecLlve reLurn on Lhe enLlre purchase prlce LhaL a properLv can aeneraLe.
Lhe amounL of cash LhaL vou have lefL over each monLh for a alven properLv
afLer all renL ls collecLed, all pro-raLlons are seL aslde, all expenses are pald, and Lhe
morLaaae on Lhe properLv ls pald.

INVESTMENT GLOSSARY
Anv addlLlons LhaL accompanv a purchase conLracL, amendmenLs need Lo be
A plcLure of a properLv from Lhe alr, wheLher bv alrplane or bv saLelllLe LhaL
loL of Llme looklna aL a properLv ln person and shows Lhe nelahborhood,
2) verlfles Lhe sLaLe of Lhe properLv from anale vou can'L see drlvlna bv. 1hls ls especlallv
schedule LhaL shows vou vour prlnclple
balance pald, lnLeresL pald, and shows how lona and aL whaL cosL vou are Lo pav off vour
a bank ordered
arLv LhaL Lrles Lo puL value on Lhe properLv. uone
bv a professlonal and llcensed Appralser, Lhe bank wanLs Lo know can Lhe properLv cover
Lhe loan. 8ased on Lhree approaches lncome approach, replacemenL approach
conLracL and aareed upon bv Lhe seller, ln whlch
who would assume Lhe properLv
aL closlna. usuallv Lhls ls done ln Lhe case of a corporaLlon whlch lsn'L acLuallv an
Lhe proflL vou aeL above Lhe selllna prlce. 1he
CaplLal aaln has noLhlna Lo do wlLh flnanclna. ?ou musL also facLor ln depreclaLlon and
rovemenLs or resLoraLlon LhaL wlll elLher enhance
Answers a slmple quesLlon: whaL ls Lhe effecLlve
ls a percenLaae whlch alves vou an esLlmaLe of
Lhe effecLlve reLurn on Lhe enLlre purchase prlce LhaL a properLv can aeneraLe.
Lhe amounL of cash LhaL vou have lefL over each monLh for a alven properLv
lons are seL aslde, all expenses are pald, and Lhe
Cash on Cash keturn - a calculaLed number found bv dlvldlna Lhe annual cash flow bv Lhe
amounL of cash LhaL was necessarv Lo secure Lhe flnanclna for Lhe properLv. ulfferenL
Lhan a Cap 8aLe, Lhls number varles based upon Lhe amounL of cash necessarv Lo secure
Lhe flnanclna for purchase.
C|os|ng Costs - nUD or 5ett|ement 5tatement - an accounLlna sheeL LhaL concludes a
purchase conLracL. When wrlLlna a conLracL Lo purchase properLv...Lhe Puu lncludes, Lhe
purchase prlce, cosLs of due dlllaence, and all closlna cosLs -- lncludlna lender fees,
lnspecLlons, survevs, LlLle work, and anv repalrs or conLracL amendmenLs of anv cosLs wlll
be on Lhls documenL. 1hls documenL deLermlnes who pavs whaL Lo close Lhe real esLaLe
LransacLlon.
Co||atera| - Anv real or personal properLv havlna markeLable value LhaL a borrower
pledaes as securlLv ln order Lo obLaln a loan. ln morLaaae LransacLlons, speclflc land ls Lhe
collaLeral.
Commerc|a| Þroperty - properLv LhaL ls aenerallv used for lnvesLmenL purposes (examples
are a freesLandlna bulldlna, commerclallv-zoned land, aparLmenL complex, sLrlp cenLer).
Cenerallv refers Lo anv real properLv excepL a 1 Lo 4 unlL slnale resldenL.
Comm|ss|on - CompensaLlon provlded Lo a servlce represenLaLlve for Lhe leaal advocacv
and admlnlsLraLlon work done on behalf of Lhe cllenL. usuallv expressed as a percenLaae.
ln real esLaLe, an aaenL would be pald aL Lhe sale (or close) of a LransacLlon Lhrouah Lhe
closlna aaencv.
Comparab|e Market Ana|ys|s - (commonlv referred Lo as CCMÞS) an approach Lo
assesslna Lhe value of a properLv ln LhaL Lhe focus ls on Lhe markeL value of properLv
based on Lhe sale oLher comparable homes of slmllar value and/or ln Lhe nelahborhood.
Corporat|on - a leaal enLlLv wlLh lLs own Lax ldenLlLv slmllar Lo an lndlvlduals', whlch can
represenL lnLeresL ln lnvesLlna. A corporaLlon exlsLs Lo provlde some lnsulaLlon from
llablllLv.
Debt 5erv|ce - 1he amounL of Lhe monLhlv pavmenL on a morLaaae. 1he loan orlalnaLor
usuallv charaes reaularlv reoccurrlna fees LhaL are charaed for Lhe use of Lhe borrowed
funds - called lnLeresL. 1he orlalnal amounL borrowed and lLs remalnlna balance ls known
as Lhe prlnclpal.
Deed - a leaal documenL LhaL convevs Lhe LlLle (or ownershlp) of Lhe properLv.


Defau|t - a breech ln Lhe Lerms of Lhe conLracL. 1here can be pre-neaoLlaLed penalLles or
Lhere mav noL be anv loss. A law sulL could also Lake place lf Lhere ls a loss due Lo Lhe
assumpLlon of Lhe sale of properLv.
Deferred Ma|ntenance - LoL of undone work on Lhe properLv (broken wlndows, cracked
brlcks, palnLlna, roof ln dlsrepalr).
Deprec|at|on - a Lax law beneflL assoclaLed wlLh properLv ownershlp LhaL LhaL allows vou
Lo assume LhaL everv vear vour properLv ls worLh less. AbouL 2.3° annuallv, depreclaLlon
reduces vour Laxable lncome. A wav offseL lncome, vou can Lake lL as an expense as a
maLLer of speaklna. ?ou can recapLure Lhls when vou sell.
D|sc|osure - A leaal requlremenL bv whlch Lhe sellers of speclflc Lvpes of properLv or
under cerLaln clrcumsLances musL reveal wheLher Lhere ls a knowledae of speclfled
lnformaLlon Lo poLenLlal buvers (such as lead-based palnL, mold, asbesLos, or oLher
poLenLlallv hazardous subsLances).
D|stressed Þroperty - ls concerned wlLh flnanclna, noL Lhe acLual properLv. ln Lheorv, lf
Lhe bank ls wllllna Lo work wlLh an lnvesLor, can be a reallv aood deal. 8e careful, Lhe
banks owe more Lhan Lhe properLv ls worLh, so do a aood analvsls and make sure lL's a
aood deal reaardless of wheLher lL's dlsLressed or noL.
Due D|||gence -See CpLlon Þerlod
Larnest Money - A sum of monev (usuallv abouL $300) offered bv a prospecLlve buver as
a slan of aood falLh ln wlLh an offer Lo purchase a properLv from Lhe seller. 1hls monev ls
surrendered unless Lhe seller aarees Lo release lL or ln Lhe case of a lack of aareemenL.
Lffect|ve Gross Income - lncome of Lhe properLv before debL servlce. lncome from all
renLs collecLed mlnus expenses (such as lawn servlce, properLv Laxes, lnsurance,
vacancles, uLlllLles, all expenses,
Lqu|ty - 1he dlfference beLween whaL vou owe on a properLv and whaL ls lLs neL value.
1heoreLlcallv, lL's Lhe effecLlve value of a properLv afLer lLs sold debLs pald off.
Lscrow - An accounL arranaemenL bv a lender (raLher Lhan bank or owner flnance) lnLo
whlch Lhe borrower pavs for Laxes and lnsurance.
Lstoppe| Cert|f|cates - A documenL slaned bv Lhe LenanL dlscloslna Lhe currenL condlLlons
of Lhe lease and anv addlLlonal aareemenLs beLween Lhe landlord and LenanL.
Lv|ct|on - 1he leaal process of removlna a LenanL from Lhe properLv for defaulLlna on Lhe
lease ln somewav, usuallv for lack of renL pavmenL. 1he [udae wlll rule. 1he Sherrlff can
help escorL Lhe LenanL off Lhe premlses.
Ia|r nous|ng Act - 1he lalr Pouslna AcL esLabllshes a naLlonal pollcv of falr houslna. 1he
law makes lL llleaal for anv person or buslness Lo dlscrlmlnaLe ln Lhe sale, lease,
adverLlslna, or flnanclna of houslna or maklna houslna oLherwlse unavallable because of:
race color rellalon sex, handlcap (dlsablllLv), or famlllal sLaLus naLlonal orlaln.
InA - Iedera| nous|ng Adm|n|strat|on - auaranLees a loan for lender (or bank). usuallv
refers Lo federal morLaaae lnsurance for lenders Lo flnance borrowers who are usuallv
lower-lncome and have dlfflculLv comlna up wlLh a down pavmenL, whlch ls a
requlremenL of a Lvplcal morLaaae. 1he caLch here ls LhaL Lhe monev would be pald back
Lhrouah lnsurance premlums. CrlalnaLed ln Lhe 1930s amldsL masslve foreclosures.
I|nanc|ng - how vou wlll pav for a purchase. 1hls amounL of monev ls borrowed. Answers
Lhe quesLlon ln a real esLaLe LransacLlon of how much of Lhe purchase wlll be cash and
how much wlll be borrowed. 1hls amounL ls Lo be evenLuallv pald back wlLh lnLeresL and
ls shown on an amorLlzaLlon schedule, Lxamples lnclude: lPA, vA, ConvenLlonal.
Iorec|osure - releases Lhe properLv of prlmarv and secondarv llens on a properLv.
varlous counLles have dlfferenL pollcles assoclaLed wlLh foreclosure. 1he bank reassumlna
Lhe properLv and a defaulL on a loan mav aucLlon Lhe properLv sLarLlna Lhe blddlna aL Lhe
cosL Lhev are Lrvlna Lo recoup from Lhe properLv. AfLer foreclosure onlv Lax, federal, and
sLaLe llens remaln.
Gross kent Mu|t|p||er - ls calculaLed bv Laklna Lhe purchase prlce of Lhe properLv and
dlvldlna lL bv Lhe aross annual renL. 1hls number alves vou an ldea lf Lhe aross renL on a
properLv ls sufflclenL enouah Lo [usLlfv Lhe purchase prlce on Lhe properLv. A low aross
mulLlpller number ls deslred and ldeallv lL wlll be below 3.
Gross kenta| Income - Lhe maxlmum poLenLlal renL posslble for a alven properLv aL Lhe
currenL renLal raLes assumlna LhaL all unlLs are renLed and all LenanLs pav.
Income Approach - an approach Lo analvzlna Lhe value of a properLv (aka valuaLlon) ln
LhaL Lhe focus ls on Lhe lncome. 1hls number ls calculaLed bv Laklna Lhe nCl and dlvldlna
lL bv Lhe CAÞ raLe.
Income 5tatement - AkA ÞroflL & Loss sLaLemenL (or Þ & L) - All lncome and Lxpenses
demonsLraLlna how a properLv ls performlna ln a alven perlod of Llme. lL shows ln Lheorv
Lhe lncome poLenLlal of a properLv under Lhe clrcumsLances of Lhe currenL owner.

Inspect|on keport - 1he aoal ls Lo feel comforLable LhaL vou undersLand Lhe Lvplcal
condlLlon of Lhe properLv. Seek ouL a llcensed lnspecLor Lo check all vacanL unlLs and a
sufflclenL number of occupled unlLs. 8eporL should have an esLlmaLe of deferred
malnLenance. See Appralsal
Interest or |nterest rate - 1he loan orlalnaLor usuallv charaes reaularlv occurrlna fees LhaL
are charaed for Lhe use of Lhe borrowed funds. 1hese fees are usuallv expressed as a
percenLaae of Lhe prlnclpal loan amounL. 1he loan raLe ls based on Lhe credlL rlsk of Lhe
borrower and Lhe lnflaLlon raLe.
Intermed|ary 5tatus - a condlLlon ln real esLaLe when boLh sldes of a real esLaLe
LransacLlon (boLh Lhe buver's represenLaLlve and Lhe seller's represenLaLlve) Lake place
under Lhe same broker. 1hls musL be dlsclosed on Lhe conLracL and Lakes place elLher
when one aaenL represenLs boLh buvers and sellers or when Lwo aaenLs under Lhe same
broker represenL's one or Lhe oLher.
Lease - A conLracL aareemenL beLween a LenanL and a landlord LhaL spells ouL Lhe Lerms
of Lenancv. 1he lease explalns: how lona Lhe LenanL, who and whaL can llve ln Lhe
properLv, Lhe use of Lhe properLv, and who pavs for whaL (such as uLlllLles, Laxes, renL,
and lnsurance).
Lease opt|on - usuallv refers Lo commerclal leases where aL Lhe end of a renLal
lease...Lhere ls an opLlon for Lhe leasee (or LenanL) Lo alve noLlce Lo Lhe owner of Lhelr
lnLenLlon Lo renew Lhe lease for a pre-deLermlned amounL (usuallv aL an lncrease ln raLe).
LssenLlallv Lhls ls an opporLunlLv Lo LenanLs who have commlLLed Lhemselves Lo Lhe space
Lhev renL Lo recommlL.
Leas|ng Agent - a person worklna on behalf of Lhe seller Lo lease Lhe properLv. Slmllar Lo
a real esLaLe aaenL, excepL Lhls person ls looklna onlv Lo lease ouL Lhe unlL. A [ob ofLen
performed bv properLv manaaers.
Leverage - ls used when vou purchase a properLv wlLh a llLLle monev down. 1he aoal ls Lo
aeL a mulLlple reLurn on vour lnvesLmenL. An ldeal leveraae Lo reLurn raLe would be 3:1.
1wo Lhlnas Lo be concerned abouL are debL servlce and depreclaLlon.
L|en - Lhe asslanmenL of a debL or a noLlflcaLlon LhaL Lhere ls a debL aaalnsL an asseL. A
banker's or mechanlc's llen wlll noLlfv poLenLlal purchasers or lnvesLors LhaL a debL exlsLs
on Lhe properLv LhaL musL be saLlsfled. A llen effecLlvelv holds up LlLle.
LIn1C (or Low Income nous|ng 1ax Cred|ts) - lederal Lax credlLs avallable Lhrouah Lhe
1ax 8eform AcL of 1986 LhaL lncreases affordable houslna ln a Lroubled economlc markeL.
1hev are a mlxed baa, due Lo Lhe llmlLaLlons and resLrlcLlons LhaL accompanv Lhese
credlLs.
L|ne of Cred|t - monev avallable Lo vou Lo help vou malnLaln vour buslness. 1here are
Lwo Lvpes: secured and unsecured. unsecured carrles wlLh lL a hlaher lnLeresL raLe Lhan a
secured llne of credlL.
L|qu|d|ty - 1he sale value of real properLv as represenLed bv real esLaLe markeL
condlLlons.
L|st|ng Þr|ce - 1he prlce a seller lnlLlallv suaaesLs Lhe properLv should sell for ln Lhe
markeL. 1he prlce usuallv reflecLs markeL value and Lhe seller's lnLeresL ln Lhe properLv.
WheLher Lhls prlce ls hlah or low ls deLermlned bv aood analvsls of Lhe markeL and an
assessmenL of Lhe properLv's performance.
Loan Approva| - when a bank approves a purchase and exacLs cerLaln requlremenLs on
Lhe borrower such as Lerm lenaLh, loan amounL llmlL, lnLeresL raLe and provldes a
auaranLee LhaL Lhev wlll flnance Lhe purchase aL closlna.
Loan Cr|g|nat|on Iee - A fee charaed Lo Lhe borrower bv Lhe lender for Lhe admlnlsLraLlve
cosLs of processlna and creaLlna a morLaaae loan whlch ls usuallv compuLed as a
percenLaae of Lhe loan amounL and ls ofLen expressed ln polnLs.
Low-8a|| Cffer - An offer from a prospecLlve properLv buver LhaL ls much lower Lhan Lhe
llsLlna prlce whlch mav lndlcaLe LhaL Lhe buver belleves LhaL Lhe properLv wlll noL recelve
manv aood offers and LhaL Lhe buver ls lnLeresLed ln Lhe properLv onlv lf lL can be
purchased aL a baraaln prlce.
Market Ana|ys|s - when vou look aL Lhe markeL and lnLervlew whaL oLher people are
renLlna or selllna. lor renLals: flaure ouL whaL unlLs ln a slmllar area and slmllar unlL Lvpe
are renLlna Lhelr unlLs. lor sale: aeL a sllce of approxlmaLelv 3 unlLs LhaL are on Lhe
markeL, 3 unlLs LhaL have recenLlv sold and flaure ouL where vour properLv flLs and aL
whaL prlce vou could sell lL.
Market kent - Lhe Lvplcal renL vou could expecL Lo flnd for a parLlcular unlL ln a alven
area. 1he markeL renL helps deLermlne whaL vour renLs would be. ?ou reallv can'L devlaLe
Loo far from Lhe markeL unless vour aparLmenL has a compelllna case.
Market kent Ana|ys|s - currenL markeL renLs for comparable unlLs ln Lhe markeL LhaL vou
are conslderlna for purchase

Market 5urvey - 1hls ls a helpful Lool whlch alves provldes dlrecLlon Lo whaL raLe Lo senL
renLs aL. 1he renLal amounL needs Lo be close Lo whaL raLes are seL aL for comparable
rooms ln Lhe area. 1hls Lool can someLlmes be found aL Lhe local chapLer of Lhe
AparLmenL AssoclaLlon
Meets & 8ounds - a llnear descrlpLlon of Lhe boundarv llne. 1heoreLlcallv, wlLh Lhls
documenL vou could walk Lhe parameLer of Lhe properLv.
Month-to-month tenancy - aL Lhe concluslon of Lhe lease perlod Lhls ls a defaulL sLaLe of
leaslna wherebv Lhe ma[or faceLs of Lhe lease remaln blndlna on landlord and LenanL wlLh
Lhe excepLlon LhaL lL's a monLh bv monLh aareemenL. ln whlch case onlv a 30-dav noLlce
would be requlred Lo vacaLe Lhe properLv.
Mortgage - A loan Lo flnance Lhe purchase of real esLaLe. Comes wlLh a pavmenL perlod
and lnLeresL raLes. 1he borrower (morLaaaor) alves Lhe lender (morLaaaee) a llen on Lhe
properLv as collaLeral for Lhe loan.
Net Income Mu|t|p||er - or NIM - a helpful number ls analvsls Lo esLlmaLe Lhe value of
renLal properLv. A useful wav Lo see how Lhe properLv ls performlna relaLlve Lo lLs markeL
prlce. 1hls facLor when mulLlplled bv Lhe neL CperaLlna lncome or nCl alves vou a
esLlmaLe of Lhe properLv's value.
Net Cperat|ng Income - or NCI - ls Lhe dlfference beLween Lhe LoLal renL collecLed mlnus
all expenses. 1hls number doesn'L counL debL servlce, whlch ls facLor LhaL would chanae
based on Lhe owner's credlL and personal flnances.
Cperat|ng Lxpenses - WhaLever cosLs lncurred whlle aLLempLlna Lo malnLaln and run a
buslness. 1he lnclude lawn servlce, properLv Laxes, lnsurance, vacancles, uLlllLles,
Cpt|on Money - or Cpt|on Iee - an amounL usuallv abouL $100 or more.whlch ls a ºaeL
ouL of [all free" card. A small loss LhaL helps vou make sure vou're offer prlce ls adequaLe
and wheLher or noL, anv chanaes Lo conLracL are needed Lo accompllsh a falr closlna.
Cpt|on Þer|od - or Due D|||gence - Lhe perlod of Llme wrlLLen lnLo Lhe conLracL a buver
has Lhe opporLunlLv Lo lnspecL a properLv lncludlna buL noL llmlLed Lo Lhe flnanclals,
lnsurance, Lax records, morLaaae copv, leases, renL rolls, esLoppels cerLlflcaLes, eLc.
Þortfo||o - a summarv of all lnvesLmenLs and some lnformaLlon abouL Lhelr performance.
Þr|me kate (or pr|me) - 1he lowesL raLe lnLeresL LhaL a lender or morLaaaee, such as a
bank would charaes lLs mosL credlL worLhv cusLomers. 1hls raLe ls seL bv Lhe lederal
8eserve, lL's Lhe raLe for banks Lo borrow from each oLher and from Lhe lederal 8eserve.
Þr|nc|pa| - a word wlLh manv uses ln real esLaLe.for lnvesLors lL refers Lo an amounL
lnvesLed whlch ls dlfferenL Lhan lncome or proflLs.
Þr|vate Mortgage Insurance - (ÞMI) - aka morLaaae lnsurance. lL ls dlsLlnaulshed from
lPA and vA lnsurance, whlch are aovernmenL-run proarams. 1he cosL of lnsurance varles
dependlna on Lhe slze of Lhe down pavmenL and Lhe loan amounL, lL's Lvplcallv onlv
abouL one-half of 1 percenL of Lhe loan. 1he borrower pavs Lhe premlums, buL Lhe lender
ls Lhe beneflclarv. 1he coveraae proLecLs lenders aaalnsL Lhe borrower's defaulL. lf vour
down pavmenL on a home ls less Lhan 20 percenL of Lhe appralsed value or sale prlce, vou
musL obLaln morLaaae lnsurance.
Þrof|t & Loss - (Þ & L) - 1hls wlll show vou Lhe expenses LhaL vou wlll lnherlL wlLh Lhe
purchase of Lhe properLv. Llke aas, elecLrlclLv, waLer, Lrash, sewaae, and lnsurance. 8elna
able Lo see Lhe expenses aolna back 2 or more vears ls preferred Lo undersLand a
properLles performance.
Þrom|ssory Note - (or noLe) Lhe morLaaae. 1he monev borrowed or flnanclna lncurred for
Lhe purchase of a properLv usuallv pald monLhlv wlLh a prlnclpal and lnLeresL componenL.
Þroperty 1ax - Annual pavmenLs Lo Lhe counLv, clLv, schools, colleaes, eLc LhaL are
assessed upon properLv owners.
Þroperty 1ax kecords - a free and useful Lool for deLermlnlna Lhe value of a properLv
LhaL ls malnLalned bv Lhe 1ax Assessor. Allows vou Lo do vour own analvsls on a properLv.
1hls Lool provldes lmporLanL lnformaLlon such as Lhe vear bullL, hlsLorv of properLv, sq
fooLaae of lmprovemenLs and land, address and name of owner or corporaLlon, & deed
daLe.
Cu|t C|a|m Deed - A deed Lransferrlna whaLever lnLeresL ln a properLv or LlLle, wlLhouL
warranLv.
kea| Lstate Leverage - see leveraae
kef|nance (or kef|) - An lnvesLmenL declslon wherebv addlLlonal monevs are borrowed
Lo pav off an exlsLlna loan. lL's usuallv Lhe same loan amounL and uses Lhe same properLv
as collaLeral. ln mosL cases, Lhls ls done Lo swlLch flnanclna from ad[usLable raLe Lo a flxed
raLe morLaaae
kent ko|| - a aenerlc documenL LhaL shows Lhe vacancv raLe on a properLv. usuallv vou
wlll see LenanL name, renL amounL, move-ln daLe, lease daLes, deposlL, and unlL
lnformaLlon such as Lhe number of 1, 2, or 3+ unlLs. Compare Lhe renL roll Lo Lhe leases
verlfv LhaL Lhev maLch up exacLlv.
kenta| Income - Lhe lncome LhaL vou aeneraLe from collecLlna renL.
kep|acement Cost - an approach Lo assesslna Lhe value of a properLv ln LhaL Lhe focus ls
on Lhe cosL of lL would Lake Lo bulld Lhe exlsLlna properLv Lodav, mlnus a depreclaLlon
schedule based on how manv vears lL's been ln place.
keturn on Investment - or 8Cl - slmllar Lo cash on cash reLurn
5a|es Þr|ce - aka Lhe purchase prlce - ls Lhe aareed upon amounL of monev needed Lo
purchase a alven properLv beLween Lhe buver and seller. 1hls amounL ls usuallv
neaoLlaLed Lhrouah a realLor Lo be muLuallv beneflclal lf posslble.
58A - (Small 8uslness AdmlnlsLraLlon) - lederal aaencv LhaL asslsLs small buslnesses wlLh
advlce, flnanclna, and oLher buslness developmenL ald. 1he S8A lLself does noL make
loans, buL auaranLees repavmenL of loans made bv a bank or flnance companv.
5ecur|ty depos|t - monev recelved from Lhe LenanL LhaL ls pald when a lease ls execuLed
wlLh Lhe lease (or LenanL). 1hls monev lnsures LhaL LenanL wlll perform Lhe
responslblllLles of Lhe lease, lL's a wav Lo hold Lhe LenanL accounLable for Lhe sLewardshlp
of Lhe properLv.
5ett|ement 5tatement - see Closlna SLaLemenL
5pec|a| Þurpose Þropert|es - properLles LhaL meeL speclal communlLv purposes such as
mlnl-sLoraae faclllLles and moblle parks.
5urvey - an aerlal dlaaram showlna boundarv locaLlons and measuremenLs of Lhe
bulldlnas on properLv. LasemenLs, flood plalns, number of loLs, and loL slze for a alven
properLv. MusL be obLalned from a llcensed survevor.
1ax Assessment - An appralser ls someone who appralses all Lhe properLles ln a alven
counLv each vear. Some flahL Lo keep Lhelr assessors Lo keep properLv assessmenLs low.
nowadavs assessmenLs can be hlaher, lnvesLors need Lo do Lhelr analvsls and noL see Lhls
amounL as a purchase prlce.
1ax Cert|f|cates - A cerLlflcaLe prepared bv Lhe morLaaae provlder or lnvesLor lndlcaLlna
wheLher properLv Laxes and speclal assessmenLs on morLaaaed properLv have been pald.
1|t|e -1hls documenL usuallv prepared and lnsured bv a LlLle companv reveals anv
flnanclal problems. A clear LlLle ls expecLed aL a closlna. 1he LlLle companv wlll research
Lhe prevlous and currenL owners of a properLv Lo see lf Lhere are anv llens or anvLhlna
LhaL should be dlsclosed abouL Lhe Lrue value of a properLv.
1|t|e Comm|tment - A promlse Lo lssue an lnsurance pollcv on a plece of properLv.
Craanlzed lnLo flve maln parLs lL Lells 1) Who ls belna lnsured, 2) Lhe amounL of Lhe
lnsurance - Lhe sales prlce, 3) whaL ls lnsure
WhaL ls requlred Lo lnsure Lhe LlLle
lnsured. 1he purpose ls Lo lnsure
sale of Lhe properLv. lL fullv dlscloses
wheLher Lhere are anv burdens, llens especlallv LhaL wlll prevenL a lender from belna ln
flrsL-poslLlon ln Lhe case of a defaulL on Lhe loan.
1|t|e Insurance -1he LlLle researches currenL and pasL owners of
looklna for llens on Lhe properLv. 8anks deslre lnsurance for Lhelr loans. lf Lhe LlLle ls
clear, Lhls puLs Lhe lender ln flrsL poslLlon, whlch excludes anvone else from belna
compensaLed lnsLead of Lhe bank Lo reclalm Lhelr losL.
1r|p|e Net Lease - An aareemenL where Lhe LenanL ls aolna Lo pav properLv Laxes,
lnsurance, and all malnLenance. 1he advanLaae Lo Lhe seller ls LhaL lL's llke vou sold lL, buL
vou sLlll own lL.Lhere wouldn'L be anv expenses. usuallv used ln commerclal
LransacLlons.
Un|t Matr|x - all unlLs on Lhe properLv wlLh room counL, square fooLaae, and currenL
renL, eLc.
VA - veLeran Affalrs Loans - A loan auaranLeed bv Lhe uS ueparLmenL of veLeran Affalrs.
vA loan can now be used Lo buv a home wl
recenLlv lncreased Lhe Maxlmum CuaranLv AmounL for veLeran home loans Lo as much as
$729,730. Powever, vA and lPA have non
borrower, ofLen Lhese are charaed anvwav
neaoLlaLlons.
Vacancy kate/Iactor - 1he percenLaae amounL of vacanL unlLs Lo occupled unlLs. ln mv
analvsls, l counL vacancles as an expense, whlch provldes a clearer plcLure of
performance because vacanL unlLs aren'L collecLed lncome and do lncur expenses, such
as lnsurance and
Warranty Deed - A deed whlch auaranLees Lhe LlLle for a properLv from Lhe seller Lo Lhe
buver.


SHEEHY TEAM
INVESTMENT GLOSSARY

A promlse Lo lssue an lnsurance pollcv on a plece of properLv.
Craanlzed lnLo flve maln parLs lL Lells 1) Who ls belna lnsured, 2) Lhe amounL of Lhe
Lhe sales prlce, 3) whaL ls lnsured--Lhe leaal descrlpLlon of Lhe properLv 4)
WhaL ls requlred Lo lnsure Lhe LlLle -- no llens and a slaned affldavlL, 3) whaL ls noL
e a clean LlLle for purchaser, seller, and a
sale of Lhe properLv. lL fullv dlscloses wheLher cerLaln requlremenLs have been meL or
wheLher Lhere are anv burdens, llens especlallv LhaL wlll prevenL a lender from belna ln
poslLlon ln Lhe case of a defaulL on Lhe loan.
1he LlLle researches currenL and pasL owners of a alven properLv for sale
looklna for llens on Lhe properLv. 8anks deslre lnsurance for Lhelr loans. lf Lhe LlLle ls
clear, Lhls puLs Lhe lender ln flrsL poslLlon, whlch excludes anvone else from belna
compensaLed lnsLead of Lhe bank Lo reclalm Lhelr losL.
An aareemenL where Lhe LenanL ls aolna Lo pav properLv Laxes,
lnsurance, and all malnLenance. 1he advanLaae Lo Lhe seller ls LhaL lL's llke vou sold lL, buL
vou sLlll own lL.Lhere wouldn'L be anv expenses. usuallv used ln commerclal
all unlLs on Lhe properLv wlLh room counL, square fooLaae, and currenL
A loan auaranLeed bv Lhe uS ueparLmenL of veLeran Affalrs.
vA loan can now be used Lo buv a home wlLh no down pavmenL. 1he ueparLmenL of vA
recenLlv lncreased Lhe Maxlmum CuaranLv AmounL for veLeran home loans Lo as much as
$729,730. Powever, vA and lPA have non-allowable fees LhaL are usuallv charaed Lo Lhe
ofLen Lhese are charaed anvwav, buL Lo Lhe seller. 1hls can effecL conLracL
1he percenLaae amounL of vacanL unlLs Lo occupled unlLs. ln mv
analvsls, l counL vacancles as an expense, whlch provldes a clearer plcLure of
performance because vacanL unlLs aren'L collecLed lncome and do lncur expenses, such
A deed whlch auaranLees Lhe LlLle for a properLv from Lhe seller Lo Lhe
SHEEHY TEAM
INVESTMENT GLOSSARY
A promlse Lo lssue an lnsurance pollcv on a plece of properLv.
Craanlzed lnLo flve maln parLs lL Lells 1) Who ls belna lnsured, 2) Lhe amounL of Lhe
Lhe leaal descrlpLlon of Lhe properLv 4)
no llens and a slaned affldavlL, 3) whaL ls noL
and a lender of Lhe
wheLher cerLaln requlremenLs have been meL or
wheLher Lhere are anv burdens, llens especlallv LhaL wlll prevenL a lender from belna ln
a alven properLv for sale
looklna for llens on Lhe properLv. 8anks deslre lnsurance for Lhelr loans. lf Lhe LlLle ls
clear, Lhls puLs Lhe lender ln flrsL poslLlon, whlch excludes anvone else from belna
An aareemenL where Lhe LenanL ls aolna Lo pav properLv Laxes,
lnsurance, and all malnLenance. 1he advanLaae Lo Lhe seller ls LhaL lL's llke vou sold lL, buL
vou sLlll own lL.Lhere wouldn'L be anv expenses. usuallv used ln commerclal real esLaLe
all unlLs on Lhe properLv wlLh room counL, square fooLaae, and currenL
A loan auaranLeed bv Lhe uS ueparLmenL of veLeran Affalrs.
Lh no down pavmenL. 1he ueparLmenL of vA
recenLlv lncreased Lhe Maxlmum CuaranLv AmounL for veLeran home loans Lo as much as
allowable fees LhaL are usuallv charaed Lo Lhe
effecL conLracL
1he percenLaae amounL of vacanL unlLs Lo occupled unlLs. ln mv
analvsls, l counL vacancles as an expense, whlch provldes a clearer plcLure of
performance because vacanL unlLs aren'L collecLed lncome and do lncur expenses, such
A deed whlch auaranLees Lhe LlLle for a properLv from Lhe seller Lo Lhe

INVESTMENT GLOSSARY