Basic Real Estate Terms Every Investor Should Know

Basic Real Estate Terms Every Investor Should Know

APR (Annual Percentage Rate)

The APR is the yearly interest accrued on your

total loan that you're responsible for paying

each year.

Amenities

Amenities are the aspects of a property that

are in addition to the bare bones structure. They include walk-in closets, storage space, stone countertops and

more.

Appreciation

Appreciation is whenever something increases in worth,

whether due to increased demand or

scarcity.

Closing

The final step in a real estate transaction when the title transfers from the seller to the buyer

and the seller gets paid.

Closing Costs

These are all of the costs associated with

closing that cover various brokerage and escrow fees that the

buyer is responsible for paying.

Collateral

This is something offered by the borrow in exchange for a loan so that, in the event that

the borrow forgoes payment, the lender can

seize the collateral.

Direct Cost

This is the summation of all of the expenses that go into the construction

of a structure and include things like the cost of

labor and the cost of the materials.

Depreciation

The opposite of appreciation, this is

when something decreases in value. In real estate, this can

happen due to unfavorable location or wear and tear on the

property.

Escrow

When something is in escrow, it's being held by

a third party for a particular means, usually

until the recipient completes a certain

action.

Equity

Equity is the amount of your property that you

actually own. If you have a house worth

$100k and your mortgage on it is for $60k, then you have

$40k in equity in your home.

Interest Rate

The interest rate reflects the current

average rate of borrowing money.

Underwriting

This involves doing extensive research on the investment and

uncovering any risks involved with each

deal.