Real Estate Terminology | Glossary

Terminology, slang.



Below you will find the most common use of Real Estate Terminology, terminology focusing on real estate investing.

INDEX OR TERM Meaning and definition
EM EM=equity multiple=Total Cash Distributions / Total Equity Invested
IRR IRR=Internal rate of Return.
XIRR XIRR=Extended Internal Rate of Return calculates investment returns where multiple transactions happen simultaneously.
LTC LTC=Loan to Cost=Construction Cost/Loan Amount​​
LTV LTV=Loan to Value=Mortgage Amount/Appraised Property Value
LP LP=Limited Partner
GP GP=General Partner = Sponsor
T12 T12=TTM (Trailing Twelve Months) = financial statement that shows a multifamily property's previous twelve months of operations.
WALT Walt measures the weighted average remaining contractual lease term for all tenants at a property.
PGI PGI=Potential Gross Income
EGI EGI=Effective Gross Income
DSCR DSCR=Debt Service Coverage Ratio = Net Operating Income (NOI) / Debt Service.
DY DY=Debt Yield = Net Operating Income (NOI) / Loan amount.
ROI ROI = Return on investment or costs, a ratio between net income and investment.
Borrower Borrowing entity (SPE)
NOI Net Operating Income. NOI = Income - Expense
Guarantor(s) carve-out guarantors, etc.
Sponsor (Operational Risk). The individual or operating entity directly or indirectly promotes or manages Borrower's day-to-day operations (e.g., Pension Fund advisor, fund manager - Sponsor does not need an ownership interest in the Borrower).
Borrower Affiliate Any material individual or entity affiliated with Borrower, excluding Sponsor and Key Principals.
Key Principal(s) (Equity Risk). Any entity or individual with >= 20% direct or indirect beneficial ownership interests in the borrowing entity. A Key Principal of the Borrower can also be the Sponsor or Guarantor.
Carried interest Carried interest is effectively a payment for investment services that are taken from the profits of the money managed for investors.
Debt Yield property NOI/loan amount
LTPP Loan To Purchase Price in Commercial Real Estate
OIR Office Industrial Retail
Alternative Investments  Alternative Investments are financial assets outside the mainstream asset classes, like stocks, bonds, and cash. The alternative asset class offers a broad collection of diverse unregistered investments. Learn more about alternative investments.
Fee Simple Interest A "fee simple" or "fee simple estate" is the most common way real estate is owned in the U.S.
Fee Simple refers to absolute ownership, limited only by the four primary governmental powers:
1) taxation,
2) eminent domain,
3) police power,
4) escheat.
AFFO AFFO is Adjusted Funds From Operations.
Related questions/keywords: affo meaning, affo definition.
Learn more about AFFO - REIT Valuation by FFO and AFFO
Passive investor passive investor meaning:

A passive investor does not actively seek out or manage investments. Passive investors typically invest in a diversified portfolio of stocks, bonds, or other securities and hold them for the long term. They do not try to time the market or make trades based on short-term price movements. Instead, they seek to achieve a relatively stable return over time by holding diverse investments.
Vanilla Strategy Real Estate The vanilla strategy includes passive index investing, an index primarily focusing g on real estate allocation.

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