Real Estate Investing Glossary
AAPL Member · Direct Lender Since 2016 · NMLS #1979189
Real estate lending has its own language, and a lot of it gets used as if everyone already knows it. This glossary defines the terms that actually come up when you’re financing an investment property — in plain English, with the practical meaning that matters to a borrower, not just a textbook definition. It’s organized loosely from the core financing concepts outward. Bookmark it; the same handful of terms reappear across every loan you’ll ever do.
The Core Numbers
ARV (After-Repair Value). What a property will be worth after your renovation is complete, supported by comparable sales and an appraisal. It’s the basis for sizing a fix and flip loan — lenders typically keep your total purchase-plus-rehab within about 70% of ARV.
LTV (Loan-to-Value). The loan amount as a percentage of the property’s value. Lower LTV means more of your own equity in the deal, less risk for the lender, and usually a better rate.
LTC (Loan-to-Cost). The loan as a percentage of your total project cost (purchase plus rehab, or land plus construction). Construction loans are sized on LTC — often up to 90% — alongside an ARV ceiling.
DSCR (Debt Service Coverage Ratio). A rental property’s income divided by its debt payment. A DSCR of 1.0 means the rent exactly covers the mortgage; above 1.0 means it covers it with room to spare. It’s the qualifying basis for a DSCR loan.
NOI (Net Operating Income). A property’s income after operating expenses but before debt service. It’s the foundation of commercial and multifamily underwriting.
Debt Yield. NOI divided by the loan amount — a lender’s measure of return independent of rate or term, used heavily on value-add commercial deals.
Loan Types
Hard Money Loan. Short-term, asset-based financing secured by the property rather than your income. The umbrella category for most investor short-term lending. See our hard money hub.
Fix and Flip Loan. A hard money loan that funds both the purchase and rehab of a property you’ll renovate and sell.
DSCR / Rental Loan. Long-term financing for a rental, qualified on the property’s rent rather than your personal income.
Bridge Loan. Short-term financing that spans a temporary gap — buying before you sell, or holding a property until it’s ready for permanent financing. See bridge loans.
Ground-Up Construction Loan. Financing to build a new structure from scratch, disbursed in stages through a draw schedule. See construction loans.
Transactional Funding. Very short-term capital that funds the A-to-B leg of a wholesaler’s double close, repaid almost immediately.
Cash-Out Refinance. Replacing your loan with a larger one and taking the equity difference in cash. See cash-out refinance.
Strategies and Mechanics
BRRRR. Buy, Rehab, Rent, Refinance, Repeat — the strategy of acquiring and renovating with short-term money, leasing the property, refinancing into a long-term loan, and pulling your capital back out to do it again.
Draw / Draw Schedule. On a rehab or construction loan, funds released in stages as work is completed and verified by inspection, rather than all at once. You typically pay interest only on what’s been drawn.
Dutch vs. Non-Dutch Interest. Dutch interest charges you on the full committed loan even before it’s disbursed; non-Dutch charges only on drawn funds. Non-Dutch is cheaper for the borrower.
Seasoning. A required holding period before a lender will refinance at a property’s current value. A no-seasoning policy after a renovation is what makes BRRRR efficient.
Points (Origination). A one-time fee charged as a percentage of the loan at closing, separate from the interest rate. Always compare loans on rate and points together.
Interest-Only. A payment structure covering only interest, not principal — standard on short-term loans, keeping monthly carry low.
Proforma. Projected financials for a property after stabilization or improvement — what a value-add deal will produce, used to underwrite bridge and value-add loans.
Entities and Documents
LLC (Limited Liability Company). The entity most investors use to hold property, for liability protection and cleaner accounting. Business-purpose loans are typically closed in an LLC.
Business-Purpose Loan. A loan for investment or business reasons rather than a personal residence — the category all investor loans fall under, which is why income rules differ from a consumer mortgage.
Term Sheet. A written summary of proposed loan terms — amount, leverage, rate, points, term, and conditions — issued before full underwriting.
Comps (Comparables). Recent sales of similar nearby properties used to establish value or ARV. A clean comps package speeds up valuation and closing. Our loan document checklist covers what else you’ll provide.
Frequently Asked Questions
LTV (loan-to-value) measures the loan against the property’s value; LTC (loan-to-cost) measures it against your total project cost — purchase plus rehab or construction. Fix-and-flip and construction loans use both: LTC caps how much of your cost is funded, while an ARV-based LTV caps the loan against the finished value.
Debt Service Coverage Ratio — a rental’s income divided by its mortgage payment. At 1.0 the rent exactly covers the payment; above 1.0 it covers it with a cushion. It’s how a DSCR loan qualifies a property without looking at your personal income.
Buy, Rehab, Rent, Refinance, Repeat. You acquire and renovate with short-term financing, lease the property, refinance into a long-term loan, and pull your original capital back out to fund the next deal — repeating the cycle to build a portfolio.
A one-time origination fee charged as a percentage of the loan at closing, separate from the interest rate. Because points are paid up front, you should always compare loan offers on rate and points together, weighed against how long you’ll hold the loan.
A required holding period before a lender will refinance at the property’s current (often higher) value. No seasoning after a renovation means you can refinance at the new value right away — the key to recycling capital quickly in BRRRR.
Now the deals make sense too.
We’re a direct lender that’s been turning these concepts into funded loans since 2016 — happy to walk through any of them as they apply to your deal.