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Intermediate1 hour18 terms

Dual Income REI: Key Terms Collection

Explore a curated collection of key terms essential for understanding dual income strategies in real estate investment. This reference highlights commonly encountered concepts that can help clarify your approach to generating multiple income streams from properties. It's designed to support your learning, not provide exhaustive coverage.

Term Collection

1

Capital Accumulation

Capital accumulation is the process of increasing one's wealth or assets over time by saving, investing, and reinvesting earnings to build a larger financial base.

Beginner5-6 min
2

Net Worth

Net worth is a measure of your financial health, calculated by subtracting your total liabilities (what you owe) from your total assets (what you own). It provides a snapshot of your financial standing at a specific point in time.

Beginner4-5 min
3

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is a financial metric used in commercial real estate lending to assess a property's ability to generate sufficient Net Operating Income (NOI) to cover its annual mortgage debt payments.

Advanced15-18 min
4

Capitalization Rate

The Capitalization Rate (Cap Rate) is a real estate valuation metric used to estimate the potential rate of return on an investment property, calculated by dividing its Net Operating Income (NOI) by its current market value.

Intermediate14-15 min
5

Cash-on-Cash Return

Cash-on-Cash Return (CoC) is a real estate investment metric that calculates the annual pre-tax cash flow generated by a property as a percentage of the total cash an investor has invested.

Intermediate15-18 min
6

Multi-Family Property

A multi-family property is a residential building containing two or more separate dwelling units, offering investors multiple income streams from different tenants.

Beginner11-12 min
7

Joint Mortgage

A joint mortgage is a home loan taken out by two or more borrowers who share equal responsibility for the debt, pooling their incomes and assets to qualify for financing and typically sharing ownership of the property.

Intermediate5-6 min
8

Debt Capacity

Debt capacity is the maximum amount of debt an individual or entity can prudently take on while maintaining financial stability and meeting repayment obligations. For real estate investors, it's a critical metric for assessing borrowing limits, managing risk, and planning portfolio expansion.

Intermediate5-6 min
9

Debt-to-Income Ratio

The Debt-to-Income (DTI) Ratio is a financial metric used by lenders to assess a borrower's ability to manage monthly payments and repay debts, calculated by dividing total monthly debt payments by gross monthly income.

Intermediate18-20 min
10

House Hacking

House hacking is a real estate investment strategy where you live in one unit of a multi-unit property or a portion of a single-family home, and rent out the remaining units or rooms to cover your housing expenses.

Intermediate14-15 min
11

Down Payment

A down payment is an initial upfront payment made when purchasing a property, representing a portion of the total purchase price and reducing the amount of money borrowed through a mortgage.

Intermediate15-18 min
12

Leverage in Real Estate

Leverage in real estate refers to the use of borrowed capital, typically mortgage loans, to finance a property purchase, aiming to amplify potential investment returns on the equity invested.

Intermediate4-6 min
13

Qualifying Income

Qualifying income is the total verifiable and stable income a borrower can demonstrate to a lender to secure financing, primarily used to assess repayment capacity for mortgages and real estate loans.

Intermediate5 min
14

Cash Flow

Cash flow in real estate investing represents the net income generated by a property after all operating expenses and debt service payments have been made. Positive cash flow indicates profitability, while negative cash flow suggests a loss.

Intermediate2-3 min
15

Passive Income

Passive income refers to earnings from an enterprise in which an individual is not actively involved, typically generated from real estate investments like rental properties, REITs, or syndications, requiring minimal ongoing effort after initial setup.

Intermediate13-15 min
16

Underwriting

Underwriting is the process by which lenders assess the risk of lending money for a real estate transaction, evaluating the borrower's creditworthiness and capacity to repay, as well as the property's value and marketability.

Intermediate15-18 min
17

Net Operating Income

Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.

Intermediate11-12 min
18

Investment Property Loan

An Investment Property Loan is financing used to purchase real estate intended for income generation or capital appreciation, not for the borrower's primary residence. These loans have distinct qualification requirements and terms compared to owner-occupied mortgages.

Intermediate5 min

Common Questions