Lease that requires the tenant to pay all costs (including rent) associated with the operation, repair and maintenance of the building. This includes real estate taxes, utilities, repair and maintenance. Also referred to as net-net-net (NNN) or triple net.
The amount of inventory or units of a specific commercial property type that become occupied during a specified time period (usually a year) in a given market, typically reported as the absorption rate.
Accelerated cost recovery system
A tax calculation that provides greater depreciation in the early years of ownership of real estate or personal property.
A provision that gives a lender the right to collect the balance of a loan if a borrower misses a payment.
A measurement of land equal to 43,560 square feet.
The number of years a structure has been standing.
Adjustable-rate mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.
Adjusted cost basis
The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.
The amount of time between interest rate adjustments in an adjustable-rate mortgage.
A person given authority to manage and distribute the estate of someone who died without leaving a will.
A legal document that an administrator of an estate uses to transfer property.
The acquisition of title to property through possession without the owner's consent for a certain period of time.
The access and use of property without the owner's consent.
A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.
Americans with Disabilities Act
A law passed in 1990 that outlaws discrimination against a person with a disability in housing, public accommodations, employment, government services, transportation and telecommunications.
The repayment of loan principal and interest through equal payments over a designated time period.
Mathematical tables that lenders use to calculate a borrower's monthly payment.
A large steel bolt anchored in concrete and attached to a building to prevent the structure from moving.
Annual debt service (ADS)
The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.
Annual Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the balance of the loan.
Regular fixed payments or receipts over a designated time period.
An opinion of the value of a property at a given point in time.
The fee that an appraiser charges to estimate the market value of the property.
A detailed written report on the value of a property based on recent sales of comparable sites in the area.
An opinion of the current market value of a property.
An increase in the value of a property.
A fire-resistant mineral used for insulation and home products that has been found to pose a health hazard.
A tax assessor's determination of a property?s value in order to calculate a tax base.
The estimated value of a piece of real estate or a levy placed on property in addition to taxes.
Items of value which include cash, real estate, securities and investments.
A transfer in which all of the tenant?s leasehold interest in a property goes to another party. Nevertheless, the original tenant remains liable unless released from future obligations by the owner.
A person who transfers rights and interests of a property.
A mortgage that can be transferred to another borrower.
A provision that allows a buyer to take responsibility for the mortgage from a seller.
A fee the lender charges to process new records for a buyer who assumes an existing loan.
Average annual effective rate
The average annual effective rent divided by the total square feet.
Average annual effective rent
The tenant?s total effective rent divided by the lease term.
An easement over private property near an airport that limits the height of structures and trees.
A secondary bid for a property that the seller will accept or negotiate if the first offer fails.
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
The final lump sum payment due at the end of a balloon mortgage.
The minimum rent due to the landlord. Typically, it is a fixed amount. This is a face, quoted, contract amount of periodic rent. Escalations are calculated from the annual base rate.
A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 7.25 percent and a mortgage at 7.35 percent is 10 basis points.
Bill of sale
A document that transfers ownership of personal property.
A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.
Blanket insurance policy
A policy that covers more than one person or piece of property.
An agreement that insures one party against loss by acts or defaults of another party.
The point in which the owner's rental income matches expenses and debt.
The sales threshold over which percentage rent is due. It is calculated by dividing the annual base rent by the negotiated percentage applied to the tenant?s gross sales.
A contract in which the owner agrees to develop or finish a property or space to the specifications of the tenant. The tenant may partly carry the cost in the form of increased rent.
A comprehensive set of laws that controls the construction or remodeling of a home or other structure.
A city or county employee who enforces the building code and ensures that work is correctly performed.
Building line or setback
Guidelines that limit how close an owner can build to the street or an adjacent property.
A halt on construction to slow the rate of development.
Regulations that limit the manner in which property can be used.
Industrial space category that describes properties consisting of little more than four walls, a roof, and a floor.
see Capitalization Rate
The cost of making improvements on a property.
Taxable income derived from the sale of a capital asset. It equals the sale price less the costs of sale, adjusted basis, suspended losses, excess cost recovery, and recapture of straight-line cost recovery.
Any improvement that extends the life or increases the value of a piece of property.
The supply and demand for resources to invest in real estate and other investments.
A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by purchase price. Also known as cap rate.
The net cash received in any period, taking into account net operating income, debt service, capital expenses, loan proceeds, sale revenues, and any other sources and uses of cash.
Cash flow after taxes (CFAT)
Calculated from the cash flow before taxes, less the tax liability (savings), plus investment tax credit.
Cash flow before taxes (CFBT)
For properties, it is the result of several steps; calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital additions.
An investment return ratio derived by dividing cash return by cash invested.
Certificate of Deposit (CD)
A document showing that the bearer has a specified amount of money deposited with a bank or other financial institution.
Certificate of deposit index
An index based on the interest rates on six-month CDs. It used to determine the interest rate for some adjustable-rate mortgages.
Certificate of eligibility
A document issued by the Veterans Administration that verifies the eligibility of a veteran for a loan program.
Certificate of occupancy
A document which states that a home or other building has met all building codes and is suitable for habitation.
Certificate of sale
A document issued at a judicial sale, which entitles the buyer to receive a deed after court confirmation of the purchase of the property.
Chain of title
The official record that details the ownership history of a piece of property.
Personal property such as furniture, clothing or a car.
Classified property tax
A tax that varies in rate depending on the use of the property.
A property that does not have liens, defects or other legal encumbrances.
The final procedure in which documents are signed and recorded, and the property is transferred.
Expenses incidental to the sale of real estate including, but not limited to, loan, title and appraisal fees.
A document that details the final financial settlement between a buyer and seller and the costs paid by each party.
Cloud on title
An invalid encumbrance on real property.
A second party who signs a promissory note and takes responsibility for the debt.
Commercial real estate
Any multifamily, office, industrial, or retail property that can be bought or sold in a real estate market.
Commercial strip property
A strip of commercially zoned land divided into parcels to be developed for retail use. These properties usually have a fairly narrow trade area and offer a variety of products and services.
Areas within a building and its site, such as lobbies, hallways, grounds, and parking lots, that is available for non-exclusive use by all tenants.
Interest computed on the original principal and accumulated interest.
The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.
A type of calculation in which interest earned is reinvested and earns additional interest.
A promise by a lender to make a loan if the borrower meets certain conditions.
Individual units in a building or development in which owners hold title to the interior space while common areas such as parking lots, community rooms and recreational areas are owned by all the residents.
The change in title from a single owner of an entire project or building to multiple owners of individual units.
Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.
The total monetary rental obligation specified in a lease. See base rent.
A voluntary obligation such as a mortgage or trust deed.
Any restrictions imposed on the amount or type of new development in an area.
Convertible adjustable-rate mortgage
A mortgage which starts as an adjustable-rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.
The transfer of title of property.
A tax imposed on the transfer of real property.
An annual deduction based on the class life of an asset.
A response to an offer.
Any area that is subject to natural hazards or a land feature that supports unique, fragile or valuable natural resources including fish, wildlife or other organisms or their habitats or such resources that carry, hold or purify water in their natural state.
Debt Coverage Ratio
The ratio between the net income of an investment and the amount of debt service of the investment: expressed as (NOI / DS = DCR).
The periodic payments of interest and/or principal on a property's indebtedness.
The legal document that transfers ownership of a piece of property.
Deed of trust
A document that gives a lender the right to foreclose on a piece of property if the borrower defaults on the loan.
The failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments.
Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value.
A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.
An analysis of soil to determine if the surface can support the foundation of a property.
Money given by the buyer with an offer to purchase property. Also known as earnest money.
The decline in value of a piece of property.
Fees that a borrower pays at the time the lender makes the loan. One point equals 1 percent of the total loan amount.
The percentage rate at which money or cash flows are discounted. The discount rate reflects both the market risk-free rate of interest and a risk premium. See opportunity cost.
The process of reducing the value of money received in the future to reflect the opportunity cost of waiting to receive the money.
Property that is in poor physical or financial condition.
A vertical gutter that empties water from the roof to the ground.
A fungal decay that causes wood to become brittle and crumble.
A relationship in which a real estate agent or broker represents both parties in a transaction.
Standard language in a mortgage which states that the loan must be paid when the property is sold.
A structure that consists of two separate family units.
The condition in which buyers can occupy the property before the sale is completed.
Money a buyer gives with an offer to purchase a property. Also called a deposit.
A right given by the owner to use a portion of the property for certain purposes, such as power lines or water mains.
The age of a structure estimated by an appraiser based on its condition rather than its actual age.
Effective rental income
The resulting income a property produces after estimated vacancy and credit losses have been deducted from potential rental income.
The relationship of useable area to rentable area on a given property. It is calculated by dividing useable square feet by rentable square feet.
Structures that illegally extend onto another?s property.
A claim or lien on a property which affects the title process.
Environmental impact statement
A government-mandated evaluation of all aspects and effects a development will have on the environment of a proposed site.
Equal Credit Opportunity Act
A federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant's sex, marital status, race, religion, national origin, age or receipt of public assistance.
A determination of the value of a property after existing liens are deducted.
Equivalent Level Rate (ELR)
Flat rate per square foot that will equal the same total present value as a proposed lease's variable cash flows.
An account that a lender establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.
A neutral third party that holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.
A lender's periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.
Escrow closes when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.
Firms that act as neutral third parties to ensure that all conditions that the buyer, seller and lender establish in a real estate transaction are met.
Funds that a mortgage broker withdraws from a borrower's escrow account to pay property taxes and insurance.
The total assets of a person, including real property, at the time of death.
Estimated Increase in Equity
A specified property value increased by a selected rate of appreciation for a specific number of years.
Prevents individuals from asserting facts different from those contained in a document. Both the tenant and landlord sign the estoppel certificate to confirm the facts pertaining to the lease.
A legal procedure to remove a tenant from a property.
Examination of title
An inspection by a title company of public records and other documents to determine the chain of ownership of a property.
A contract that gives an agent the exclusive right to market a property for a specific period of time.
A person appointed to carry out the instructions in a will. If there is no will, a probate court will appoint an executor.
Right granted by the landlord which provides the option of adding more space to the premises.
The level (or maximum amount) up to which the landlord will pay certain operating expenses. Amounts above the expense stop are the tenant?s responsibility.
Mutually agreed continuation of occupancy under the same conditions as outlined in previous agreements.
Fair Credit Reporting Act
A federal law passed in 1971 that regulates the activity of credit bureaus. It is designed to prevent inaccurate or obsolete information from staying in a consumer's credit file and requires credit bureaus to have reasonable procedures for gathering, maintaining and disseminating credit information. The act also requires credit bureaus to show a consumer their credit file if the consumer presents proper identification, although the bureau reserves the right to charge a fee for doing so.
Fair Housing Act
Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.
The official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.
Federal Home Loan Mortgage Corporation
The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac. The company buys mortgages from lending institutions, pools them with other loans and then sells shares to investors.
Federal Housing Administration (FHA)
A government agency that operates a variety of home-loan programs through insuring residential mortgage loans made by private lenders.
This type of ownership is the maximum interest a person can have in a piece of real estate. It entitles the owner to use the property in any manner they see fit, in accordance with state and local laws.
Fee simple defeasible
The owner of the property holds a fee simple title contingent upon certain conditions.
The relationship of trust that buyers and sellers expect from a real estate agent. The term also applies to legal and business relationships.
The primary mortgage on a property that has priority over all other voluntary liens.
The monthly payment on a loan.
A lease in which the lessee pays a fixed rental amount for the duration of the lease.
A loan with an interest rate that will remain at a specific rate for the term of the loan.
Personal property permanently attached to a house, such as drapery rods, toilets, built-in bookcases or a furnace.
Metal strips placed around chimneys, skylights, vents, windows, doors, beneath shingles and along seams in the roof to prevent water seepage.
Hazard coverage that is required in designated flood areas.
Flat, flood-prone areas located along waterways.
A course of action a lender may pursue to delay foreclosure or legal action against a delinquent borrower.
The legal process reserved by a lender to terminate the borrower's interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower.
The relinquishing of property rights by a delinquent borrower.
A term used to describe industrial and commercial properties. The property type often is developed in an industrial park setting or as a build-to-suit on a selected piece of property. Freestanding properties usually are designed for manufacturing, distribution, assembly, packaging, and similar uses. In commercial establishments providing goods and services in single or multiple use buildings of various sizes, the larger, newer freestanding stores also are referred to as big boxes.
Fully amortized mortgage loan
A method of loan amortization in which equal periodic payments completely repay the loan.
The amount to which money grows over a designated time period at a specified interest rate.
An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees.
Government National Mortgage Association
Commonly known as Ginnie Mae, this agency buys home loans from lenders, pools them with other loans and sells shares to investors. Ginnie Mae differs from Fannie Mae and Freddie Mac, in that it only purchases loans backed by the federal government.
Graduated-payment mortgage (GPM)
A mortgage that requires a borrower to make larger monthly payments over the term of the loan. The payment is unusually low for the first few years but gradually rises until year three or five, then remains fixed.
A person who is conveyed an interest in a piece of property.
The person who conveys an interest in a piece of property to another person.
Gross leasable area
The total floor area designed for tenant occupancy and exclusive use, including basements, mezzanines, and upper floors, is measured from the center line of joint partitions and from outside wall faces. Gross leasable area is that area on which tenants pay rent; it is the area that produces income.
A lease in which the landlord pays all expenses associated with owning and operating the property.
Gross operating income
The total income generated by property operations before payment of operating expenses. It is calculated from potential rental income, less vacancy and credit losses, plus other income not affected by vacancy. Also known as Gross Scheduled Income.
Gross rent multiplier (GRM)
A number which, multiplied by the gross income of a property, produces an estimate of value of the property (e.g., if the gross income from an apartment building is $100,000 annually and an appraiser uses a gross multiplier of 12%, then the value of the building is $1,200,000.
A lease of the land only. Usually the land is leased for a relatively long period of time to a tenant that constructs a building on the property. A ground lease separates ownership of the land from ownership of buildings and improvements constructed on the land.
The provision of property insurance that covers damage by fire, wind or other hazards.
The concentration of housing units in a specific area or on a specific property.
An office building that the Building Owners and Managers Association defines as greater than 25 stories above ground.
A home or building listed in the National Register of Historic Places and certified as historic by the U.S. Secretary of the Interior.
Home equity conversion mortgage
Loans made to older home owners who want to convert equity into money. The borrowers are qualified on the basis of the value of their home and usually receive monthly payments from the lender. The loan does not have to be repaid until the borrower no longer occupies the home.
Home equity loan
A loan that allows owners to borrow against the equity in their homes.
The power of a local government to adopt its own land-use regulations.
Housing expense ratio
The percentage of gross monthly income devoted to housing costs.
HUD-1 Uniform Settlement Statement
A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.
Fees collected from developers of new homes to pay for schools, parks and other facilities.
A portion of the monthly mortgage payment that is placed in an account and used to pay for hazard insurance, property taxes and private mortgage insurance.
Property that is not occupied by the owner but is used to generate income.
A defect in a property that cannot be fixed, such as an adjacent hazardous waste site, or that would cost too much to repair relative to the value of the property.
Financial tables used by lenders to calculate interest rates on adjustable mortgages and on Treasury bills.
A lease in which the rental amount adjusts according to changes and/or movements in a price index, commonly the consumer price index.
Commercial properties that are used for the purpose of production, manufacturing, or distribution.
Any significant new construction in an established area.
Occurs when there is more money available than there are goods and services to be purchased.
Initial interest rate
The original interest rate on an adjustable-rate mortgage.
The outlay of cash needed to acquire an investment.
Title to property that a company agrees to insure against defects and disputes.
Policies that can be purchased to guarantee compensation for specific losses.
A temporary insurance arrangement usually put in force until a permanent policy can be obtained.
The fee borrowers pay to obtain a loan. It is calculated based on a percentage of the total loan.
Interest rate caps
A limit on the amount that can be charged to the monthly payment of an adjustable-rate mortgage during an adjustment period.
Interest rate ceiling
The highest interest a lender can charge for an adjustable-rate mortgage.
The borrower pays only the interest that accrues on the loan balance each month. Since each payment goes towards interest, the outstanding balance of the loan does not decline with each payment.
Internal rate of return (IRR)
The percentage rate earned on each dollar that remains in an investment each year. The IRR of an investment is the discount rate at which the sum of the present value of future cash flows equals the initial capital investment.
Real estate that generates income.
The responsibility of two or more individuals to fulfill the terms of a loan or debt.
Ownership by two or more individuals with equal shares of a piece of property. Rights pass to the surviving owner or owners.
The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property.
A procedure to handle foreclosure proceedings as civil matters.
Loans that exceed limits set by Fannie Mae and Freddie Mac.
The owner of a leased property. See lessor and owner.
A fee a lender imposes on a borrower when the borrower does not make a payment on time.
A payment a lender receives after the due date has passed.
An invisible problem in a piece of property such as bad wiring or termite damage.
A contract stating the relationship between landlord and tenant that grants a right to exclusive possession or use of property, usually in return for a periodic payment called rent.
A lease that contains the right to purchase the property within a certain time frame.
An arrangement in which the borrower does not own a specific piece of property but possesses a long-term lease.
A description identifying and locating a piece of property that is acceptable to a court.
A bank, savings institution or mortgage company that offer loans.
The party renting or leasing a property.
The party who rents or leases a property to another party.
Letter of intent
A formal statement that the buyer intends to purchase the property for a certain price on a certain date.
The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.
The use of borrowed funds to finance a portion of the cost of an investment.
A borrower's debts and financial obligations.
A policy that protects owners against any claims of negligence, personal injury or property damage.
A claim laid by one person or company on the property of another as security for money owed.
A limit on the amount that a loan rate can move during the term of the mortgage. For example, the rate on an adjustable-rate mortgage that begins at 5 percent and has a lifetime cap of 7 percentage points cannot rise above 12 percent.
Life-cycle cost analysis
An analysis of a building project's expected operating, maintenance and replacement costs, calculated by an architect.
a legal partnership where some owners are allowed to assume responsibility only up to the amount invested.
Cash and all other assets that can be converted to cash relatively quickly. Liquid assets can include money in savings and checking accounts, money-market accounts, and most certificates of deposit.
The ability to convert an investment into cash quickly without loss of principal.
An officially designated dwelling in which the occupant conducts a home-based business or enterprise.
An official representative of a lending institution who is empowered to act on behalf of the lender within certain limits.
Loan origination fee
Most lenders charge borrowers an origination fee--or points--for processing a loan. A point is 1 percent of the total loan amount.
Loan processing fee
A fee charged by some lenders for gathering information to enable the lender to process the loan.
Loan-To-Value Ratio (LTV)
The ratio between an investment's value and its financing, expressed as a percentage. The higher the LTV Ratio, the higher the risk.
A low concentration of housing units in a specific area.
An office building that the Building Owners and Managers Association defines as fewer than seven stories above ground.
The lender's retail markup on the mortgage. For example, if the index rate for an adjustable-rate mortgage is 5 percent but the lender has a 1.5 percentage-point margin, the rate the borrower will pay is 6.5 percent.
A geographical area in which supply and demand operate to influence the course of industrial and commercial activities.
Factors affecting the sale and purchase of properties at a particular point in time.
Information collected and displayed for a given market or by market area.
The most probable price that a property would bring in a competitive and open market under fair market sale conditions.
A lease controlling subsequent leases.
A suburban plan that includes homes and commercial, work, educational and community facilities.
An encumbrance filed by subcontractors or suppliers against a property to seek payment.
Metes and bounds
A surveying method that describes land in terms of shape and boundary dimensions.
Metropolitan Statistical Area (MSA)
The area in and around a major city. The Office of Management and Budget defines an MSA as a city with a population of at least 50,000 or an urbanized area with a population of at least 50,000 within a total metropolitan population of 100,000.
An office building that the Building Owners and Managers Association defines as between seven and twenty-five stories above ground.
A project that combines several different functions, such as residential space above a commercial establishment or an entire development combining commercial, residential and public accommodations.
The legal document that secures property for the repayment of funds borrowed to purchase real estate.
A company that provides loans using its own money.
A company that matches lenders with prospective borrowers who meet the lender's criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.
Required by lenders in some loans to protect them from a possible default. Most conventional loans with less than a 20 percent down payments require private mortgage insurance (PMI).
Mortgage life insurance
A special type of insurance that will pay off a mortgage if the borrower dies before the debt is retired.
The tax write-off that the Internal Revenue Service allows most owners to claim for the annual interest payments they make on their real estate loans.
A bank or other financial institution that lends money to the borrower.
The person who borrows money to purchase a property.
Housing units that accommodate more than one family or household.
A property that contains individual units for several households but carries only one mortgage.
Municipal housing inspector
Inspectors employed by cities or counties to check all construction sites and verify that contractors are meeting building codes.
Occurs when a borrower's monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller.
Net cash flow
The income that an investment property generates after expenses such as principal, interest, taxes and insurance are subtracted.
A lease in which the tenant pays, in addition to rent, all operating expenses such as real estate taxes, insurance premiums, and maintenance costs.
Net operating income (NOI)
The potential rental income plus other income, less vacancy, credit losses, and operating expenses.
A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.
Non-recurring closing costs
Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a property inspection.
The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.
The interest rate specified in a mortgage note.
Notice of default
A lender's initial action when a mortgage payment is late, which informs that legal action may be taken.
The inadequacy, disuse, outdatedness, or non-functionality of facilities, infrastructure, products, or production technologies due to effects of time, changing market conditions, or decay. This factor is considered in depreciation to cover the decline in value of fixed assets due to the invention and adoption of new production technologies or changing consumer demands.
Charge to tenant, pursuant to its lease, such as rent, operating expense increases, parking charges, moving expenses, remodeling costs, etc.
A commercial property type maintained for or occupied by professional or business offices. Such properties typically house management and staff operations. Office properties may be classified as Class A, B, or C. Class A properties are the most functionally modern. Class B and C properties in the same market typically command lower rents because they are older and in need of modernization.
Industrial space category in attractive, park-like settings with landscaping. They are usually at the highest end of market rents and devote more than 25% of their spaces to offices. Office/service properties are similar to research and development facilities.
Industrial space category that may devote 5 to 25 percent of its space to office requirements and typically is constructed of metal, brick, block, or wood. This category usually features dock-high loading.
Operating expense stop
A negotiable amount at which the owner?s contribution to operating expenses stops. It also can be stated as the amount above which the tenant is responsible for its pro rata share of operating expenses.
Cash outlays necessary to operate and maintain a property. Examples of operating expenses include real estate taxes, property insurance, property management, maintenance, utilities, and legal or accounting expenses. Operating expenses do not include capital expenditures, debt service or cost recovery.
The cost of selecting one alternative is the benefit foregone from the next best alternative.
Original principal balance
The amount of principal owed on a loan before a borrower makes any payments.
See loan origination fee.
A retail property type usually located in rural or occasionally in tourist locations. These centers consist mostly of manufacturers? outlet stores selling their own brands at a discount and typically are not anchored. A strip configuration is most common, although some are enclosed malls or arranged in a village cluster.
Also known as percentage rent.
The party who has the right to possess, use, lease and sell a property. See landlord and lessor.
A transaction in which the seller of a property agrees to finance all or part of the purchase.
An officially described piece of land.
Partially amortized mortgage loan
A loan in which the payments do not repay the loan over its term, so a lump sum (balloon) is required to repay the loan at the end of the term.
A visible deficiency in a piece of property, such as a cracked basement slab or a sagging porch.
A periodic amount paid or received for two or more periods.
A legal limit on the amount a monthly payment can increase on an adjustable-rate mortgage.
Interest charged or accrued daily.
The rent over a base amount that tenants pay to owners on tenant sales over a specified dollar amount. It frequently is found in retail leases. Also known as overage rent.
Any property that is not real property. Examples include money, savings accounts, appliances, boats, etc.
PITI (Principal, Interest, Taxes, Insurance)
When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower's actual monthly mortgage-related expenses.
The concept began in the 19th century and describes any town or neighborhood built with certain guidelines and goals.
Residents own the home and the land, and share the use and financial responsibility for common areas.
Fees charged by lenders at the time a loan is originated. A point is equal to 1 percent of the total loan amount. Also known as a loan point.
Charges prepaid by the borrower upon origination of a loan. One point equals one percent of the loan amount. Also known as loan point.
Potential rental income
The total amount of rental income for a property if it were 100 percent occupied and rented at competitive market rates.
A retail center dominated by several large anchors, including discount department stores, off-price stores, warehouses clubs, or category killers --- stores that offer tremendous selection in a particular merchandise category at low prices. The center typically consists of several freestanding anchors and only a minimum number of small specialty tenants.
Power of attorney
A document that authorizes an individual to act on behalf of someone else.
Interest paid before it is due.
Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.
Present value (PV)
The sum of all future benefits or costs accruing to the owner of an asset when such benefits or costs are discounted to the present by an appropriate discount rate.
The amount of money that the borrower owes on a mortgage.
The portion of a loan payment used toward reducing the original loan amount.
A real estate sale triggered by the death of the owner, with proceeds to be divided among heirs or creditors.
Proceeds of Condemnation
Specifies who recovers the value of tenant improvements if an eminent domain action occurs.
The written promise to repay the mortgage loan that accompanies the mortgage.
Property/site-specific information obtained from primary and secondary sources.
Agreed-upon percentages of certain expenses associated with a piece of property that must be paid by the buyer or the seller at the time of closing.
Intangible characteristics of a local economy that define and shape the quality-of-life element and the social and cultural identity of the local population.
A document which details the purchase price and conditions of the transaction.
Calculations that lenders compute into two ratios to determine how much a potential buyer can borrow. The two ratios are called "front" and "back" ratios. The "front" ratio is a calculation based on the borrower?s monthly housing costs as a percentage of monthly income. The "back" ratio includes monthly housing costs plus additional monthly costs/debts.
A document that releases a party from any interest in a piece of real estate.
Real estate investment trust (REIT)
An investment method in which investors purchase ownership in a trust, which in turn invests the money in real estate and distributes at least 90 percent of its taxable income to investors. The trust is not subject to corporate income tax if it complies with REIT tax requirements. Shareholders must include their REIT income in their personal tax returns.
Real Estate Settlement Procedures Act (RESPA)
A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.
Land and any permanent fixtures on it, including buildings, trees and minerals.
The cancellation of a contract by law or consent by the parties involved.
When a borrower completely pays off the mortgage, the property is reconveyed to them from the lender.
A public official responsible for keeping the records of all real estate transactions.
A fee charged by escrow agents for conveying the sale of a piece of property into the public record.
The process of replacing an older loan with a new mortgage.
A retail center that provides general merchandise (a large percentage of which is apparel) and services in full depth and variety. Its main attractions are its anchors: traditional, mass merchant, discount department stores or fashion specialty stores. A typical regional center has parking surrounding the outside perimeter and is enclosed with an inward orientation of stores connected by a common walkway.
A mortgage that provides for the costs of repairing and improving a resale home or building.
The amount of unpaid principal on a loan.
The original loan term minus the number of payments made.
A period of free rent or other allowance that the owner gives to the tenant.
Rent loss insurance
A policy that covers any loss of rent or rental value in the event of fire or other damage that renders the property uninhabitable.
The computed area of a building defined by the Building Owners and Managers Association guidelines and typically measured in square feet, including both core/structure and useable area. The actual square foot area for which the tenant will pay rent, it is the gross area of an office building, less uninterrupted vertical space (such as stairways and elevators). Unlike useable area, rentable area includes common areas such as lobbies, restrooms and hallways, as well as the measurement of structural columns and architectural projections.
A policy that covers the replacement value of possessions.
When a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than go to court.
Replacement reserve fund
Money that is set aside from homeowners' assessments to replace common property, such as furniture in a planned development's community room.
When a property is taken back by the lender holding the mortgage.
Research and development
Industrial space category that is a hybrid of office and manufacturing. The research and development category is the most people-intensive of industrial properties. Tenants of these properties usually require many improvements, such as clean rooms for chip manufacturing, laboratories, cafeterias, lounges and other amenities.
All homeowners associations set aside a certain amount of money for major repairs or improvements.
A mortgage in which new terms are negotiated.
Property used to market and sell consumer goods and services. Types of retail properties include: community center, fashion/specialty center, neighborhood center, outlet center, power center, regional center, super-regional center and theme/festival center.
Retail trade area
Also referred to as service area, it generally is defined as the geographical or formal area from which a sustained patronage is attracted to support a retail center or establishment. This is determined by numerous factors including the site characteristics of the center or establishment; its accessibility; the presence or absence of physical barriers to movements; and general limitations imposed by drive time, congestion and distance/separation.
Return on Equity (ROE)
An investment return ratio derived by dividing cash return, or net profit, by equity.
Return on investment
The amount of profit a property generates.
See Home equity conversion mortgage.
A lump-sum cash benefit that an investor receives or expects to receive upon the sale of an investment.
Right of First Offer
Right which gives the tenant the first option of buying or leasing occupied property if the owner decides to sell or lease.
Right of first refusal
An agreement by a property owner to give another person the right to buy or rent the property before it goes on the open market.
Right of ingress or egress
The right to enter or leave designated premises.
Right of Offset
Specific clause in lease in which the tenant has the right to deduct from the rent the costs which are incurred to the tenant from the landlord.
Right of Survivorship
The right of survivors in a joint tenancy to acquire the interest of a deceased joint tenant.
The probability that actual cash flows from an investment will vary from the forecasted cash flows.
Sale proceeds after tax
The sale proceeds before tax less the tax liability on the sale.
Sale proceeds before tax
The sale price less the sale costs and the mortgage loan balance.
A leasing and financing strategy in which a property owner sells its property to an investor, then leases it back. This strategy frees capital that otherwise would be frozen in equity.
Also known as sublease.
Another loan placed upon a piece of property.
Secondary mortgage market
A market of packaged home loans that are resold as securities to investors. Major players are Fannie Mae and Freddie Mac.
A loan backed by collateral.
A piece of property designated as collateral.
An agreement in which the seller provides financing for a home purchase.
A firm that collects mortgage payments and manages borrowers' escrow accounts.
The minimum distance a house or buildings must be from the lot line.
A document that details who has paid what to whom.
A loan that allows a lender or other party to share in the borrower's profits when the home is sold.
A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.
A group of commercial establishments designed, built and managed as a unit to serve the immediate trade area. It provides on-site parking in proportion to the size, type and number of stores in the center.
Simple average method
A technique for calculating the vacancy rate for a market area by calculating the vacancy rate for each building, then averaging these rates to get an overall rate.
A fund designed to accumulate a designated amount of money over a specified time period. The periodic amount of money deposited plus compound interest will accumulate to the designated amount.
A foundation built directly on soil with no basement or crawl space.
An external area under the overhang of a roof.
The supply and demand for the use of physical space.
Part(s) of a leased premises set aside to accommodate tenant's future growth.
Special deposit account
Rehabilitation mortgages require a special deposit account from which restoration and remodeling funds included in the loan are disbursed to the appropriate contractors as work is completed.
Standard Metropolitan Statistical Area
Areas designated by the U.S. Office of Management and Budget that contain a city of 50,000 or more.
Standard payment calculation
A calculation that is used to determine the monthly payment necessary to repay the balance of a home loan in equal installments.
A lease in which the rental amount paid by the lessee changes by a present rate or set dollar amount at predetermined intervals. A step lease is a means for the lessor to hedge against inflation and future maintenance or operational expenses.
A loan that allows a gradual increase in the interest rate during the first few years of the loan.
The process in which the owner of a large piece of property divides it into smaller parcels.
A lease in which the original tenant (lessee) sublets all or part of the leasehold interest to another tenant (known as a subtenant) while still retaining a leasehold interest in the property. Also known as a sandwich lease due to the sandwiching of the original lessee between the lessor and the subtenant.
A segment or portion of a larger geographic market defined and identified on the basis of one or more attributes that distinguish it from other submarkets or locations.
A second or third mortgage.
A retail property type similar to regional centers, but because of its larger size, a super-regional center has more anchors, a deeper selection of merchandise and draws from a larger population base. As with regional centers, the typical configuration is as an enclosed mall, frequently with multiple levels.
A document that illustrates the property boundaries and measurements, specifies the location of buildings on the property, and indicates any easements or encroachments.
The non-cash value put into a piece of property by the owner, such as do-it-yourself improvements.
Real estate taxable income multiplied by the tax rate.
An impediment placed against a property, such as back taxes.
The public sale of a property by the government for nonpayment of taxes.
A term often applied to real estate investments that refer to various tax advantages.
A person or entity that has possession of a property through a lease. See lessee.
Tenant improvements (TI)
Preparation of leased premises prior to or during a tenant?s occupancy, which may be paid for by the landlord, tenant, or both.
Tenant-paid tenant improvements (TPTI)
The total cost (outlay) of necessary tenant improvements paid by the tenant netted against any allowance provided by the landlord.
Tenants in common
Two or more owners who share interest in a specific property.
States when the tenant begins to owe rent.
Specifies the effective period for the lease.
A retail center that typically employs a unifying theme carried out by individual shops in their architectural design and, to an extent, in their merchandise. The biggest appeal of theme/festival centers is to tourists; restaurants and entertainment facilities can anchor them. Generally located in urban areas, these centers tend to be adapted from older, sometimes historic, buildings and can be part of mixed-use projects.
Time value of money (TVM)
An economic principal recognizing that a dollar today has greater value than a dollar in the future because of its earning power.
The actual legal document conferring ownership of a piece of real estate.
Firms that ensure that the title to a piece of property is clear and provide title insurance.
A policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property.
Possible impediments to the transfer of a title from one owner to another.
A check of public title records to ascertain that the seller is the legal owner and that there are no claims or liens against the property.
Total effective rate
The rate per square foot the tenant pays over the entire period analyzed. It is calculated by dividing the total effective rent by square feet rented.
Total effective rent
The total dollar amount that the tenant will actually pay out over the entire period analyzed.
The total number of actively employed people in the workforce within a given geographic area at a particular point in time.
Total expense ratio
The percentage of monthly debt obligations relative to gross monthly income.
An attached home that is not a condominium.
An area delineated by a central or dominant location, comprising a zone that depends on production output from that location to meet internal demand, whose outermost boundaries are defined in terms of the presence or absence of interactions with that central or dominant location. For example, a localized area over which some specific activity or transaction takes place.
Other real estate or assets a buyer gives to a seller as part of the down payment.
Transfer of ownership
Any legal means by which a piece of real estate changes hands.
The state or local tax paid when title passes from one owner to another.
Securities issued by the Treasury Department that have the full backing of the U.S. government.
An index used to determine interest rate changes for adjustable rate mortgages.
Triple Net Lease (NNN)
A Lease that requires the tenant(s) to pay property expenses such as taxes, insurance, maintenance, utilities, etc.
Special accounts used by brokers and escrow agents to safeguard funds for a buyer or seller.
A legally authorized person who holds or controls a piece of property for another person.
A federal law that protects consumers in a variety of ways. One of its key provisions allows a consumer to cancel a home-improvement loan, second mortgage or other loan if the home was pledged as security (except for a first mortgage or first trust deed) until midnight of the third business day after the contract was signed.
An adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term.
Two-to-four unit property
A property that is owned by one entity but provides housing for up to four households.
U.S. Department. of Housing and Urban Development (HUD)
A federal agency that oversees the Federal Housing Administration and a variety of housing and community development programs.
The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan.
Any loan that is not backed by collateral.
The process in which a parcel of land is zoned from a lower to a higher use, such as the number of dwelling units allowed.
The unplanned expansion of development over a large area.
Area available for the exclusive use of the tenant. It is the tenant?s rentable area less certain common areas shared by all tenants of the office building (such as corridors, storage facilities and bathrooms). It is calculated by multiplying the rentable area by the building?s efficiency percentage, which is the useable square feet divided by the rentable square feet.
A reference to illegally excessive interest charged on any loan.
The number of units or space of a specific commercial type that is vacant and available for occupancy at a particular point in time within a given market. It is usually expressed as a vacancy rate.
Vacancy and Credit Losses
Income lost due to vacancies and/or tenants defaulting on lease payments.
The percentage of the total supply of units or space of a specific commercial type that is vacant and available for occupancy at a particular point in time within a given market. It is calculated by dividing vacant space by total space.
Variable interest rate
A loan rate that adjusts up and down based on factors such as changes in the rate paid on bank certificates of deposit or Treasury bills.
An interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index.
Variable rate mortgage
A loan with an interest rate that hinges on factors such as the rate paid on bank certificates and Treasury bills.
A lien that a homeowner willingly acquires (i.e. mortgage loan)
A voluntary relinquishing of certain rights or claims.
Waiver of Subrogation
Protects each party in a lease from being sued for the recovery of damages by a third party that has a claim against the other party.
A legally binding promise to do something in the future.
Weighted average method
A technique for calculating the vacancy rate for a market area by dividing the sum of the vacant space by total space in the market.
A loan made to a buyer for the remaining balance of a seller's first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan.
Houses built without space between them and with little or no yard.
Regulations that control the use of land within a jurisdiction.
A one-time modification of existing zoning regulations.