Essential Industry Terms for Real Estate Investors

• Abatement: A reduction in the amount of property tax due to claims that the property’s valuation is too high or as a result of local government programs designed to incentivize property improvements, new construction, or investment in specific geographic areas.
• Addendum: A document included in a Purchase and Sale Agreement (PSA) containing additional requests or information that can override the original terms.
• Aggregated Liquidity: The total sum of verified cash and liquid assets available across all guarantors to cover down payments, closing costs, and required project reserves.
• AIV (As-Is Value): The market value of a property in its current state, as of the valuation date.
• Appraisal: A professional estimate of a property's current value or its projected value after improvements.
• ARM (Adjustable-Rate Mortgage): A loan with a variable interest rate that resets periodically after an initial fixed period.
• ARV (After-Repair Value): The market value an investment property is expected to reach after the defined Scope of Work (SOW) is completed.

• "Bad Boy" Carve-Out: Provisions in a guarantee that allow for individual recovery in cases of fraud, willful misconduct, or gross negligence.
• Balloon Payment: A final, lump-sum payment that satisfies the remaining loan balance at a specific, contractually mandated date.
• Bridge Loan: A short-term loan (typically 6–24 months) used to bridge the gap between acquisition and a long-term exit.
• BRRR: A strategy acronym for "Buy, Rehab, Rent, Refinance," where investors use short-term debt to stabilize a property before moving into long-term financing.
• Builder’s Risk Insurance: Specialized insurance required for projects undergoing renovation or ground-up construction, with minimum coverage equal to the gross loan amount.

• Cap: A limit on how much the interest rate or monthly payment can change on an adjustable-rate mortgage.
• Capitalization Rate (Cap Rate): A valuation measure calculated by dividing Net Operating Income (NOI) by the original cost or value.
• Cash-Out Refinance: A refinance where the borrower receives net proceeds exceeding the lesser of 2% of the loan amount or $2,000.
• CDOM (Cumulative Days on Market): The total duration a property has been listed for sale across all listing periods.
• Closing: The formal event where legal ownership is transferred, or a new mortgage is finalized and funded.
• Closing Costs: The various fees and expenses paid at the settlement of a real estate transaction, whether for the purchase of a new property or the refinancing of an existing mortgage. These costs typically include lender origination fees, title insurance premiums, escrow or settlement charges, appraisal fees, and government recording or transfer taxes.
• Commercial Use: Property used for business with no residential component; Upright Lending limits mixed-use assets to <40% commercial square footage.
• Completed at Close: The specific monetary value of renovation work that was already finished prior to the loan's funding date.
• Construction Advance: The portion of the construction budget that is released to the borrower at the time of closing.
• Contingency: A contractual clause that must be met for the transaction to proceed, often protecting the buyer's earnest money.
• Cost Basis: The total acquisition cost, including purchase price plus expenses like brokerage fees, closing costs, and improvement costs.
• CPL (Closing Protection Letter): An indemnification from a title underwriter protecting the lender against errors or dishonesty by the closing agent.
• Cross-Collateralization: A method where equity from multiple properties is used to secure a single loan, often reducing the need for a cash down payment .

• Debt Type (Dutch vs. Non-Dutch): A distinction in interest accrual; Dutch loans charge interest on the full loan amount from day one, whereas Non-Dutch interest applies only to funds that have been disbursed .
• Default: The failure to meet the legal obligations of a loan for longer than 30 days.
• Delayed Financing: The financing of a property purchased within the previous 6 months that was initially purchased without financing and is now owned free and clear.
• Distressed Properties: Real estate in poor physical condition and/or nearing foreclosure.
• Document Preparation Fee: A standard fee charged by the lender to cover the creation and legal review of the mortgage documents.
• DOM (Days on Market): The number of days a property has been active on the Multiple Listing Service (MLS).
• Down Payment: The upfront equity contribution provided by the borrower toward the purchase of a property. Representing the borrower’s "skin in the game," this cash investment ensures alignment between the sponsor and the lender.
• Draw Schedule: A payment plan where funds are released in stages as construction milestones are verified via inspection.
• DSCR (Debt Service Coverage Ratio): A ratio of a property’s gross rent to the PITIA, used to determine if a rental property’s cash flow covers the debt .
• Due Diligence: The investigative process an investor performs—including inspections and title searches—to confirm the condition and value of a property.

• Earnest Money: A "good faith" deposit made by a buyer to secure a property under contract.
• EIN (Employer Identification Number): The unique tax identification number assigned to a business entity by the IRS.
• Equity: The difference between a property’s market value and its current outstanding loan balance(s).
• Escrow: A third-party account that manages disbursements for re-occurring costs like property taxes and insurance.
• Escrow Holdback (for Property Repairs): The total amount of construction funds retained by the lender to be paid out as work is completed.
• Exit Strategy: The borrower’s documented plan to pay off the loan, typically through a sale or a long-term refinance.
• Experience Tiering: The classification of borrowers as Professional, Experienced, or Inexperienced based on their verified track record of successfully-exited, like-kind properties within a recent period of time.
• Extension: The additional time granted to a borrower to complete and exit a project in exchange for a fee.

• Finalized Value: The ultimate valuation figure determined by Upright’s underwriting team after reconciling appraisals, market data, and purchase contracts.
• Fix & Flip: The strategy of purchasing, renovating, and quickly reselling a property for profit.
• Foreign National (FN): A borrower who is not a US citizen or permanent resident alien and must provide a valid foreign passport and US visa .
• Foreclosure: The legal process where a lender takes control of a property due to missed loan payments or other event of default.

• Grace period: An amount of time given after a payment due date during which late fees do not apply and account privileges remain intact, typically 10 or 15 days.
• Ground-Up Construction (GUC): Projects involving new vertical development, requiring a Builder's Contract and sufficient prior experience.
• Guarantor: A qualified individual or entity that provides an unconditional, full-recourse personal guarantee to repay the entire loan balance, plus interest and legal fees, should the borrower default. By signing, a guarantor is granting the lender the right to pursue personal bank accounts, property, and other assets to satisfy the debt .

• Hard Costs: Direct costs relating to the physical construction or improvement of a structure.
• Hard Money Loan: A specialized, asset-based loan used by real estate investors for short-term projects like rehabs.
• Heavy Rehab: Intensive projects (e.g., full gut) where the budget is $\ge$ 50% of project costs or involves major additions or use-conversions (e.g., SFR to duplex).
• Holdback: A portion of the loan funds withheld by the lender until specific project requirements or milestones are reached.
• Holding Costs: Recurring expenses of owning a property, such as taxes, insurance, and utilities.

• Initial Advance (Initial Disbursement): The specific portion of the total loan amount funded at the time of closing. This is expressed as a percentage of the lower of the purchase price or the "as-is" value, and it establishes the borrower's baseline equity in the project.
• Interest Holdback / Reserve: A portion of the loan set aside at closing to cover monthly interest payments during the life of the loan.
• Interest‑only payment: A characteristic of most short term loans, also offered as an option on long-term rental loans, where the borrower’s minimum monthly payment is only the accrued interest of the prior month, without reducing the principal. At the end of the loan term or at time of payoff, the entire principal balance becomes due as a lump sum.

• Joint Venture: A collaborative business arrangement between two or more parties to execute a specific real estate project.

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• Legal Description: The precise, legally binding text that uniquely identifies the specific boundaries of a parcel of real estate. In a mortgage context, this description must align perfectly with recorded plats, surveys, and the Title Commitment to ensure Upright Lending maintains a valid, perfected first-lien position on the correct collateral.
• Lien: A legal claim filed by a lender against a property until the debt is satisfied.
• Light Rehab: Cosmetic renovations (e.g., paint, carpet) where the budget is < 50% of project costs and no additional heated-square footage is being added.
• Liquidity: The amount of cash or liquid assets (checking, savings, etc.) a borrowing entity and/or guarantor has available to fund the project and reserves.
• Loan Officer: The primary point of contact at a lending institution responsible for guiding the borrower through the application and approval process.
• Loan Points: A form of interest paid upfront at closing; one point is equal to 1% of the total loan amount.
• LTAIV (Loan-to-As-Is Value): The ratio of the fully disbursed loan amount to the current market value of the property.
• LTARV (Loan-to-After-Repair Value): The ratio of the total gross loan amount to the expected market value after all repairs are finished.
• LTC (Loan-to-Cost): A metric comparing the total gross loan amount to the total project cost (purchase price + rehab/construction budget).
• LTP (Loan-to-Purchase): The initial loan disbursement divided by the property's acquisition price.
• LTV (Loan-to-Value): A ratio comparing the loan amount to the appraised value or purchase price.

• Market Rent: The estimated rent based on a third-party appraisal’s rent schedule or approved vendor data .
• Material Owner: A member of a borrowing entity with 25% or more controlling interest.
• Maturity: The date on which the final payment of a loan is due.
• Mixed-Use: Properties that have multiple zoning uses available, typically combining commercial and residential space.
• MLS (Multiple Listing Service): The regional database used by real estate professionals to list and search for properties for sale.
• Mortgage: A legal agreement in which a lender lends money at interest in exchange for taking title of the debtor's property.
• Multi-Family: A residential property containing multiple distinct housing units (e.g., 2–4 units or 5+ units).

• Non-Conforming Loan: A loan that does not adhere to the standard underwriting criteria of major government-sponsored entities like Fannie Mae or Freddie Mac.

• Origination Fee: A fee charged by the lender to originate a loan, usually expressed as points.

• PITIA: An acronym for Principal, Interest, Taxes, Insurance, and (Homeowners) Association (HOA) dues. The total monthly cost of property ownership.
• Position: The priority of a lender's claim against a property; First Position means the lender is paid first during a sale or foreclosure.
• Prepayment Penalty: A fee charged to a borrower who pays off their loan before a specific date, compensating the lender for lost interest income.
• Principal: The original amount of money borrowed, or the remaining amount of that original sum still owed.
• Private Lender: A non-institutional individual or company that provides capital for real estate investments.
• Proof of Funds: Documentation, such as bank statements, verifying that a borrower has the capital required to close a transaction.
• Purchase Advance: The percentage of the purchase price funded by the lender at closing.
• Purchase Sale Agreement (PSA): A written contract between buyer and seller stating the terms of the property sale.

• Qualifiable Credit Score: The specific credit score used for loan approval, generally the lowest median score among all material owners or guarantors.
• Qualifiable Like-Kind Properties: The number of successfully completed projects of a similar asset class and scope used to verify a borrower's experience.

• Real Estate Agent: A licensed professional who represents buyers or sellers in real estate transactions.
• Real Estate Broker: A professional who has earned a higher level of licensure than an agent and can independently operate a real estate business .
• Realtor®: A real estate professional who is an active member of the National Association of Realtors.
• Refinance: The process of replacing an existing loan with a new one to extend the term, lower the interest rate, or access property equity.
• Remaining After Close: The balance of construction funds that remain in escrow after the initial closing disbursement.
• Residential: A zoning designation for land used primarily for housing.
• ROI (Return on Investment): A metric to measure project profitability, calculated as net profit divided by the total cost basis.
• RUCA (Rural-Urban Commuting Area): A classification system developed by the USDA and ERS that uses census data to define the "rural" or "urban" nature of a specific area based on population density and commuting patterns.

• Scope of Work (SOW): An itemized outline of all renovations scheduled for a project, including estimated costs. Thoroughness and accuracy is critical here to ensure an accurate after-repair valuation and a smooth execution.
• Seasoning: The duration of time a borrower has owned a property or held a loan before becoming eligible for certain types of refinancing or sale.
• Secondary Valuation: An additional report, such as a Desktop Review or a second appraisal, used to confirm the accuracy of the primary valuation.
• Settlement Statement: A comprehensive document, often provided as an ALTA Settlement Statement, HUD-1 or a Closing Disclosure, that serves as the final accounting for a real estate transaction. It provides an itemized breakdown of all funds flowing through the deal, including the Initial Advance, Closing Costs, and any Interest Holdbacks or Escrow Holdbacks, culminating in the amount due to or from the borrower.
• Short Sale: A sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by the liens against the property.
• Single Family Home: A standalone residential structure designed for one family unit.
• Soft Costs: Non-construction expenses required for a project, such as legal, permits, and architectural fees.
• Sweat Equity: Value added to a property through the owner's own physical labor rather than financial investment.

• Term: The designated length of time a borrower has to repay a loan.
• Title: Legal proof of ownership of a real estate property. Upright Lending requires a lender’s title insurance policy to ensure a valid, perfected, first-lien position on the collateral. The title must be "good and marketable fee simple," establishing a clean and insurable chain of title free of any liens that could impair the lender’s primary security interest .
• Turnaround Time (TAT): The total time elapsed from the purchase of an investment property to its eventual sale or refinance.

• Underwriter: The professional responsible for verifying borrower documentation and assessing the risk of a potential loan.
• Underwriting: The process of evaluating the financial risk of a borrower and the value of the collateral before approving a loan.
• Underwriting Fee: A fee charged by the lender to cover the costs of the risk assessment and file review process.
• Unencumbered Property: Real estate held free and clear of any mortgages, liens, or legal claims, allowing the owner to sell or leverage the asset without restriction.

• Vacancy: The state of a property or unit being unoccupied, typically expressed as a percentage of the total units.

• Warranty Deed: A legal document that guarantees a seller’s right to transfer property and promises the buyer that the title is free and clear of all liens and encumbrances.
• Waterfall: A legal or financial structure that defines the order in which different parties receive payments from a property's cash flow.
• Wholesaling: A strategy where an investor enters into a contract to purchase a property and then sells the rights of that contract to another buyer for a fee.

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• Yield: The income return on an investment, such as the interest or dividends received.

• ZHVI (Zillow Home Value Index): A market benchmark used to compare a property's value against the median home value in its ZIP code.
• Zoning: The local government laws that regulate how land and buildings in specific areas can be used.