Real Estate Investing : Learn the Language

Like with most groups in like, Real Estate professionals use certain vocabulary and acronyms to help communicate their thoughts. Below I've provided a few of the more common terms that you will need to know to help you fit in to Real Estate circles:

Acronyms & Definitions

Acronyms

ARV – After Repair Value

COMPs – Comparable Values

GC – General Contractor

HML – Hard Money Lender

NMLS – National Mortgage Licensing System

POF – Proof of Funds

REIA – Real Estate Investors Association

Sub(s) – Sub Contractor

Definitions

COMPS – A method that we use to determine the value of a house, based on similarly properties that have sold in the immediate area, in the recent timeframe.

Investor Friendly Real Estate Agent – An individual who works on behalf of a Real Estate Brokerage, who has a fiduciary duty to assist their clients (primarily investors) with finding or selling their investment property.

Wholesaler – An individual or company that locates a property, below market value, with hopes of delivering this property to an investor at a low cost.

Hard Money Lender – An alternative lender who specifically makes loans on investment properties. This type of lender has a lot of discretion in who he/she lends too.

Hard Money Loan – A loan that is made to an investor so that he/she can purchase and improve an investment property. This type of loan is usually made with less favorable terms and conditions, with the understanding that an investor will need the loan for no longer than 6-12 months (max).

Scope of Work – A detailed explanation of the work that will be performed by the GC and/or Subs.

Project Plan – A detailed plan of how the Scope of Work will be executed and the timeframe in which it will be executed within.

Payment Schedule – The timeline that you will be take to pay the GC for the work that is completed by the GC and/or Subs, on your project.

Contract – The terms and conditions, that outline rules and responsibilities between you and your GC.

Demo – Short for Demolition, Demo refers to the first phase in fixing up the property. This involves the GC/Subs removing all parts of the home that will not be needed during the renovation.

Punch-Out – Punch Out or “Punch-Out" list refers to the final items that need to be fixed in a house. Often times these are minor repairs, such as quick touch-ups, to bring the house to the point of perfection.

Final Walkthrough – The final Walkthrough, is the point where you as the investor will walk through with the GC to make sure that all work is completed, per the contract and per your level of expectations.

Contractor Warranty – The contractor warranty is either provided by the contractor or by the local governing body (state). This warranty assures that any deficiencies in work will be corrected within a certain time frame after the work is completed.

Lender Inspection – The lender inspection is the time when the HML or one of their representatives come out to take a look at the property to see how work is progressing.

Payment Draws – Payment draws are given to the investor by the Lender, when Lender Inspections pass successfully.

Staging – Staging is when you take specific actions to improve the aesthetics of your investment property, with the intent to give prospective homebuyers a “visual" of how the property would look if it were lived in. Think of staging as turning a “house into a home".

Now there are a lot more specific tips that I've found helpful as I learned to Invest in Real Estate. These have been very well received by the thousands of students that we have taught Real Estate Investing online. If this sounds like your investment style, I invite you to join our Free Mini Course.

I hope you've found some value in this Blog Post. Looking forward to your Success in Real Estate!

- Khari