Real Estate Glossary
Plain-English definitions of every term used across the calculators. Each links to the relevant tool.
Adjustable Rate Mortgage(ARM)
Mortgage with a fixed initial rate that adjusts annually after a set period.
Common formats: 5/1, 7/1, 10/1 — fixed for 5/7/10 years, then adjusts annually based on a market index plus a fixed margin. Rate caps (typically 2/2/5) limit how much it can increase per adjustment and over the loan's life.
→ ARM CalculatorAfter Repair Value(ARV)
What a property will be worth after renovation, used in flipping and BRRRR.
Estimated by comparing renovated similar properties (comps) within ~1 mile and ~6 months. Off by 10% on ARV and BRRRR returns get cut in half — the single biggest source of error in flip math.
→ 70% Rule CalculatorAmortization
The schedule of how each mortgage payment splits between principal and interest.
Early payments are mostly interest; late payments are mostly principal. On a 30-year loan, the first dollar of principal payment is worth ~2x more interest savings than the last dollar.
→ Mortgage CalculatorBRRRR
Buy, Rehab, Rent, Refinance, Repeat — a real estate investing strategy.
Buy a distressed property cash or with hard money, renovate, rent it out, then refinance based on the new (post-rehab) appraised value to pull most or all your cash back out. Repeat with the same capital on the next deal.
→ BRRRR CalculatorCapitalization Rate(Cap Rate)
Net Operating Income divided by purchase price, expressed as a percentage.
A property generating $50,000 NOI on a $1,000,000 purchase has a 5% cap rate. Useful for comparing properties — ignores financing. Lower cap rate usually means lower-risk market (Boston, NYC trade at 4-6%; tertiary markets at 9-12%).
→ Cap Rate CalculatorCash-on-Cash Return(CoC)
Annual cash flow divided by total cash invested.
Measures the return on YOUR money, not the property's intrinsic yield. Same property has different CoC for different investors based on financing. Target 8%+ for stabilized rentals.
→ Rental Property CalculatorCapital Expenditure(CapEx)
Major repairs or replacements with multi-year useful life.
Roof (~25 years), HVAC (~15 years), water heater (~10 years), kitchen/bath (~25 years). Reserve 5-10% of gross rent monthly to smooth the lumpy timing.
→ Cash Flow CalculatorDebt Service Coverage Ratio(DSCR)
Net Operating Income divided by annual debt service.
A DSCR of 1.25 means the property generates $1.25 of NOI per $1 of mortgage payment — a 25% cushion. Commercial lenders typically require minimum 1.20-1.25.
→ DSCR CalculatorDebt-to-Income Ratio(DTI)
Monthly debt payments divided by gross monthly income.
Front-end DTI = housing only (target 28%). Back-end DTI = all debt including housing (conventional 36%, FHA 43%, sometimes 50% with compensating factors). The more restrictive ratio limits your loan approval.
→ Home Affordability CalculatorDepreciation
IRS deduction allowing rental property owners to write off building cost over time.
Residential rentals: 27.5-year straight-line. Commercial: 39-year. Land isn't depreciable — only the building. Recapture (25%) applies on sale unless deferred via 1031 exchange or held to death.
→ Depreciation CalculatorFederal Housing Administration Loan(FHA)
Government-backed loan with 3.5% minimum down payment.
Charges UFMIP (1.75% upfront, financed) plus annual MIP (0.50-0.55%). MIP stays for the life of the loan if down payment under 10%. Max loan limits vary by county.
→ FHA Loan CalculatorGross Rent Multiplier(GRM)
Property price divided by annual gross rental income.
Quick comparison metric — ignores expenses, vacancy, financing. Lower = better cash flow potential. Working-class metros: 6-10. Class B urban: 10-14. Coastal Class A: 16-25.
→ GRM CalculatorHouse Hack
Buying a 2-4 unit property, living in one unit, renting the others.
FHA allows this with 3.5% down (vs 25% for investment). The trick: FHA owner-occupancy requires 12+ months living there, then you can convert to a pure rental. Most successful investors started this way.
→ House Hack CalculatorLoan-to-Value(LTV)
Loan amount divided by property value.
75-80% LTV is typical for owner-occupied conventional. 75% max on cash-out refi for investment properties. PMI drops automatically at 78% LTV on conventional loans.
→ Cash-Out Refi CalculatorMaximum Allowable Offer(MAO)
The most you can offer on a flip and still hit your profit target.
Standard 70% rule: MAO = ARV × 70% − rehab cost. The 30% spread covers financing, holding, closing, selling costs plus profit. In 2026 conditions with high rates, 65% is safer than the textbook 70%.
→ 70% Rule CalculatorNet Operating Income(NOI)
Annual income from a property after operating expenses, before mortgage payments.
Gross rent minus vacancy, property tax, insurance, maintenance, management, utilities (if landlord-paid), and other operating costs. Excludes mortgage payment and capital expenditures. Used in cap rate and DSCR calculations.
→ Rental Property CalculatorOperating Expense Ratio(OER)
Operating expenses divided by gross income.
Lower OER = more efficient property. Stabilized residential typically runs 35-45%. Older buildings or properties with landlord-paid utilities: 45-55%. Excludes mortgage payments and CapEx.
→ OER CalculatorPrincipal, Interest, Taxes, Insurance(PITI)
The four components of a complete mortgage payment.
Most basic mortgage calculators show only P&I; PITI is the full picture. Add HOA dues and PMI when applicable for total monthly housing cost.
→ Mortgage CalculatorPrivate Mortgage Insurance(PMI)
Insurance protecting the lender when down payment is under 20% on conventional loans.
Typically 0.5%-1.5% of loan amount per year, paid monthly. Drops automatically at 78% LTV. FHA has its own version called MIP that lasts longer.
→ Mortgage CalculatorPro Forma
Multi-year financial projection for a real estate investment.
Standard underwriting tool — projects income, expenses, NOI, cash flow, and exit value over 5-10 years. Brokers' pro formas are nearly always optimistic. Always re-run with your own stabilization assumptions.
→ Pro Forma CalculatorSection 1031 Exchange(1031)
IRS provision allowing tax-deferred exchange of investment property for like-kind.
Defers capital gains and depreciation recapture indefinitely as long as you keep exchanging. Strict timing: 45 days to identify replacement, 180 days to close. Must use a qualified intermediary.
→ 1031 Exchange CalculatorSection 8 Housing Choice Voucher(HCV)
Federal program subsidizing rent for low-income tenants.
Tenant pays ~30% of adjusted income; the local Public Housing Authority pays the rest directly to landlord (HAP payment). Reliable government-paid income; annual inspections required.
→ Section 8 CalculatorVeterans Affairs Loan(VA)
Government-backed loan for eligible veterans, active duty, and surviving spouses.
0% down available. No PMI. Typically 0.25-0.5% lower rates than conventional. Charges a one-time funding fee (2.15-3.30% depending on use and down payment) that replaces ongoing mortgage insurance.
→ VA Loan CalculatorVacancy Rate
Percentage of rental units unoccupied at a given time.
National average 5-7%. Class A urban: 3-5%. Class C and tertiary markets: 8-12%. Cost of vacancy is the silent portfolio killer — one extended turnover wipes out a year of $25/month rent increases.
→ Vacancy Rate Calculator