If you want to invest in real estate, you need to be familiar with common industry terms. Every field has its own technical jargon to get accustomed to, and real estate is no exception. Learning the meaning behind common real estate terms helps you navigate the industry more easily.
Get Familiar with Real Estate Terms
Imagine you’re facing a group of real estate professionals and negotiating with a property seller or buyer. You want to move the discussion along and avoid having to ask the meaning of every industry term mentioned. When you understand the full meaning behind the terms that real estate experts use, you’ll be able to communicate your needs more effectively.
These terms also tend to be repetitive, so you’ll continuously encounter them as you go about the real estate investment process. Thoroughly understanding common real estate words will serve you in your day-to-day transactions and interactions as a property investor.
Here are some common real estate investing terms to learn:
1. Rental Property
Rental property is a common term real estate investors encounter. It refers to a type of property that allows owners to get a specific income from renters. There are two categories of rental property: residential and commercial real estate.
2. Short-Term Rental
A short-term rental property is generally designed for tourists. The unit is furnished and ready to be occupied right away. Typically, this property is rented out for a short time frame and commonly marketed on platforms such as Airbnb.
3. Long-Term Rental
A long-term rental is a type of property aimed at renters seeking to stay in a fixed location for a longer duration.
Most property owners prefer a long-term rental setup since it provides a steady rental income cash flow. This is also known as a traditional rental.
4. Homeowner’s Association (HOA)
HOA is a term typically encountered in planned communities and condominiums. A homeowner’s association is responsible for managing the residence in a given area. There’s a list of policies an HOA enforces that its residents are expected to follow. You’ll need to pay HOA fees if your property is a part of one.
5. Closing
Closing refers to when the purchase of a property is finalized. Closing ensures that all the final details have been taken care of. Contracts need to be signed and all the documents need to be submitted. The buyer also needs to give payment to the seller. If there’s external financing involved, it means that the lender has approved the loan.
6. Closing Costs
Before a real estate sale closes, there are payments that need to be settled. Closing costs might refer to insurance payments, attorneys fees, initial fees to lenders, homeowner’s association fees, realtors commissions and others. Any closing costs need to be paid off before the real estate transaction is completed.
7. Rental Income
Rental income is the amount of money that a landlord receives from a renter occupying their property. This is among one of the most common terms used by real estate investors.
8. Multiple Listing Service
A multiple listing service is made up of a database where you can discover listed homes for sale or for rent. Real estate agents and brokers can access this marketing system and inform their clients of available rentals and properties for sale.
Since properties are added by listing agents, this is a useful resource if you’re looking to buy, sell or rent a property.
9. Cash Flow
The amount of money left after all the required payments are finished is what’s termed as cash flow. Payments can refer to mortgage payables, maintenance fees, repair costs or other costs associated with owning a property.
Cash flow can be positive or negative. If you still have money left after all the payoffs, you have a positive cash flow. If you end up with more expenses than earnings, you have a negative cash flow.
10. Seller’s Market
When fewer properties are available in the market, property prices skyrocket due to high demand. This is an advantage for the property sellers and is termed a seller’s market.
11. Buyer’s Market
A market environment where plenty of properties are available for purchase leads to lower property prices. Property demand is also reduced, which is an advantage for property buyers who can negotiate prices. This is referred to as a buyer’s market.
12. Appreciation
Over a long period, a real estate property increases its value which results in a higher price. This is called property appreciation. The rise in value can be a result of heightened demand, inflation or limited available properties in a given area.
13. Credit Score
A credit score is a measure of how creditworthy an individual is by checking one’s credit ratings. When a person has a good credit score, they’re more likely to get approved for financing by lenders and to sign a lease as a renter.
Most lenders and landlords assess a candidate based on their credit score since it shows their capacity to complete loan payments or regularly pay off monthly rental fees.
14. Realtor
Realtors are real estate professionals acting on behalf of buyers or sellers during property negotiations. They’re a member of the National Association of Realtors and must comply with its rules of conduct and ethics.
15. Real Estate Agent
Real estate agents are real estate professionals representing buyers or sellers during a negotiation. They’re typically working under a real estate broker.
16. Real Estate Broker
Real estate brokers are licensed industry professionals who can represent buyers and sellers in a transaction. They’re independent and have real estate agents working for them. Brokers have lots of real estate expertise and can manage complex transactions due to their intensive training.
Bottom Line: Understand Common Real Estate Terms
These are some of the real estate investing terms you’re bound to encounter on a regular basis. Getting familiar with these early can make real estate transactions easier to handle. If you’re looking for a trusted real estate partner, contact Level Property Management Group today!
You can reach our experienced property managers by phone at (251) 210-1664 or by email at leads@levelpmg.com
