Intermediate terms

Real Estate Capital Stacking: Essential Terms

Explore essential terms related to accumulating capital for real estate investments. This curated collection clarifies key concepts for down payments, reserves, and leveraging various funding sources. It's designed to support your learning journey, not provide exhaustive coverage.

Learning Path

FICO Score

A FICO Score is a three-digit number that summarizes your credit risk, used by lenders to determine your creditworthiness for loans, including mortgages.

Beginner12-13 min

First-Time Homebuyer Programs

Government-backed and private initiatives designed to help individuals purchase their first home by offering financial assistance, favorable loan terms, and educational resources.

Intermediate5-6 min

Capital Stack

The capital stack is the hierarchical structure of all debt and equity financing used to fund a real estate investment, defining the priority of payment, risk, and return for each capital source.

Advanced13-16 min

Gift Funds

Gift funds are money provided by an eligible donor, typically a family member, to a homebuyer to help cover a down payment or closing costs. These funds are not expected to be repaid.

Beginner2-3 min

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

Closing Costs

Closing costs are the various fees and expenses incurred by buyers and sellers at the end of a real estate transaction, covering services like loan origination, title insurance, appraisal, and legal fees.

Intermediate13-14 min

401(k) Loan

A 401(k) loan allows participants to borrow a portion of their vested retirement savings, repaying the principal and interest back into their own account, often used by real estate investors for short-term capital needs like down payments or rehabilitation.

Intermediate6 min

Private Mortgage Insurance

Private Mortgage Insurance (PMI) is a type of insurance required by lenders for conventional loans when a borrower makes a down payment of less than 20%, protecting the lender in case of default.

Intermediate15-18 min

VA Loan

A mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA) for eligible service members, veterans, and surviving spouses, offering benefits like no down payment and no private mortgage insurance.

Intermediate12-13 min

USDA Loan

A USDA Loan is a zero-down payment mortgage program backed by the U.S. Department of Agriculture, designed to help eligible low-to-moderate income individuals purchase homes in designated rural areas.

Intermediate6 min

Cash Reserves

Cash reserves are readily available funds held by a real estate investor to cover unexpected property expenses, operational shortfalls, or periods of vacancy, ensuring financial stability and risk mitigation.

Intermediate2-3 min

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

Side Hustle

A side hustle is an additional income-generating activity, often in real estate, undertaken alongside primary employment to earn extra money, gain experience, and build capital for future investments.

Beginner3 min

Real Estate Refinancing

Real estate refinancing is the process of replacing an existing mortgage loan with a new one, typically to secure better terms, lower payments, or access property equity for investment purposes.

Intermediate15-18 min

Joint Venture

A real estate Joint Venture (JV) is a collaborative business arrangement where two or more parties combine resources, expertise, and capital for a specific real estate project, sharing both the risks and rewards.

Intermediate14-15 min

401(k) Withdrawal

A 401(k) withdrawal is the act of taking funds from a 401(k) retirement account, often incurring ordinary income taxes and a 10% early withdrawal penalty if done before age 59½ without qualifying for an exception.

Intermediate5 min

Real Estate Investment Budgeting

Real estate investment budgeting is the process of creating a detailed financial plan to estimate all expected income and expenses associated with an investment property, guiding financial decisions and ensuring profitability.

Intermediate14-15 min

Equity

Equity in real estate is the portion of a property's value that an owner truly owns, free and clear of any outstanding debts or liens. It is calculated as the property's current market value minus the total amount owed on any mortgages or loans.

Beginner12-13 min

FHA Loan

An FHA loan is a government-insured mortgage backed by the Federal Housing Administration, offering lower down payments and more flexible credit requirements to make homeownership more accessible.

Intermediate15-18 min

Loan-to-Value Ratio

The Loan-to-Value (LTV) ratio is a financial metric used by lenders to assess the risk of a mortgage loan, calculated by dividing the loan amount by the property's appraised value, expressed as a percentage.

Intermediate14-15 min

Home Equity Loan

A Home Equity Loan is a type of second mortgage that allows homeowners to borrow a lump sum against the equity in their property, repaid over a fixed term with a fixed interest rate. It's often used by real estate investors to fund new acquisitions or property improvements.

Intermediate5-6 min

BRRRR Method

The BRRRR Method is an advanced real estate investment strategy (Buy, Rehab, Rent, Refinance, Repeat) designed to build a scalable rental property portfolio by leveraging forced appreciation to recycle initial capital for subsequent investments.

Advanced14-15 min

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by the equity in your home, allowing flexible borrowing and repayment up to a set limit.

Intermediate14-15 min