A real estate portfolio is a collection of investment properties owned by an individual or an entity, designed to generate income and appreciate in value over time. A diversified portfolio balances geographic and property-type risks to achieve optimal returns.
Portfolio income consists of earnings derived from various investment activities including interest, dividends, royalties, and capital gains from the sale of investment property. It differs from earned income and cannot be used to offset passive activity losses.
Portfolio value refers to the aggregate value of a real estate portfolio, potentially exceeding the summed individual values of its constituent assets due to operational efficiencies, synergies, or collective appeal.
Positive cash flow in real estate indicates that rental income exceeds property-related expenses, ensuring profitability and sustainability.
Positive leverage refers to the use of borrowed funds that enhances the return on investment. It indicates that the cost of borrowing is lower than the return generated by the investment.
Possession in real estate refers to the holding, control, or custody of property for one’s use, either as the owner or as a person with another legal right to the property. Possession can vary based on the extent and legality of the occupier's claim or usage.
A procedural step requiring mortgage lenders to publicize their intention to foreclose on a property due to a borrower's default. This notice is meant to inform the public and the property owner of the impending foreclosure action.
The term 'potable' refers to water or other liquids that are safe and suitable for human consumption. Potable water is free from harmful contaminants and meets the quality standards set by health authorities.
Potential Gross Income (PGI) represents the total rental income a property could generate if it were fully occupied at market rental rates and without any deduction for vacancies, rental concessions, or collection losses.
Potentially Responsible Parties (PRPs) refer to individuals or entities that are legally liable for contamination and remediation of hazardous waste sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
POTENTIALLY RESPONSIBLE PARTIES (PRP) are individuals or entities potentially liable for environmental contamination under Superfund laws such as CERCLA and SARA. These parties can include current or former owners, operators, transporters, and disposers of hazardous waste at a contaminated site.
A Power Center is a type of shopping center that primarily features a small number of large tenants, typically anchor or junior anchor tenants. These tenants often serve as 'category killers' in their respective markets, dominating the retail segment they represent.
A Power of Attorney (POA) is a legal document that grants one individual (the agent or attorney-in-fact) the authority to act on behalf of another person (the principal) in legal or financial matters.
A clause sometimes inserted in mortgages or deeds of trust; grants the lender (or trustee) the right to sell the property upon certain defaults. The property is to be sold at auction but court authority is unnecessary.
The Prairie House is an early-twentieth-century style residence characterized by a long, low roofline, continuous rows of windows, and an unadorned exterior, conceptualized to cater to the physical and psychological needs of its inhabitants. This architectural development is largely credited to Frank Lloyd Wright.
The initial stage in which a lender evaluates a borrower's financial capability to approve a specific loan amount, providing prospective homebuyers confidence and an advantage during the home buying process.
A pre-foreclosure sale is a transaction in which a third-party buyer purchases a property after the underlying mortgage has been posted for foreclosure but before the property has been repossessed by the lender or liquidated to pay the debt.
PREA (Pension Real Estate Association) is a non-profit trade association dedicated to serving pension funds and other institutional investors involved in real estate investment.
Preclosing is a process conducted prior to the final closing of a real estate transaction whereby instruments are prepared and signed by some or all parties involved in the contract. This process is especially useful in complex transactions involving multiple parties or arrangements.
Predatory lending refers to unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. These practices take advantage of borrowers' lack of knowledge and often result in borrowers being burdened with loans they cannot afford, high interest rates, and excessive fees.
Preexisting Use refers to properties or structures whose existing use does not align with current zoning regulations but were legally established under previous zoning rules.
Prefabricated construction involves assembling building components in a factory before delivering and installing them on-site. This method often reduces construction time and costs while ensuring consistent quality.
Preleasing involves obtaining lease commitments for a property prior to its availability for occupancy, often required for securing permanent mortgage financing.
A Preliminary Plat is a detailed planning document used in real estate development to illustrate how a tract of land can potentially be subdivided into lots and outline infrastructural elements before final plat approval.
A preliminary title report is a report issued by a title company before a real estate transaction, stating a willingness to insure the title upon closing. It identifies any encumbrances, liens, or legal impediments on the property.
The term 'premises' in real estate refers to land and tenements; an estate; the subject matter of a conveyance.
Premium has multiple meanings in real estate: it refers to the cost of an insurance policy, the value of a mortgage or bond in excess of its face amount, and the amount over market value paid for some exceptional quality or feature.
Prepaid expenses refer to amounts that are paid in advance for goods or services to be received in the future. These expenses are recorded as assets until they are consumed, at which point they are expensed on the income statement.
Prepaid interest refers to interest that is paid in advance of the time it is earned. It's typically associated with mortgage loans where borrowers pay interest upfront to reduce future interest payments.
Prepaids at closing refer to the upfront payments required by a lender to fund an escrow account for future payments of property-related expenses such as hazard insurance, property taxes, and private mortgage insurance (PMI). They might also cover interest accruing from the closing date until the end of the month.
Prepaying a mortgage involves retiring the principal balance, either in full or partially, before the scheduled due date according to the mortgage contract. This action can release the borrower from future interest payments and may lead to early ownership of the property.
A prepayment clause permits a borrower to pay off a loan before its maturity date, sometimes incurring a penalty for the privilege of early payment.
Prepayment penalty is a fee that some lenders impose on borrowers who pay off a loan early, helping the lender recover some of the interest they would have earned if the loan went the full term.
Prepayment Privilege refers to the right of a borrower to retire a loan before its maturity date without incurring any prepayment penalty. This feature provides borrowers with the flexibility to pay off loans faster, potentially saving on interest costs over the life of the loan.
Prepayment risk is the probability that a fixed-income security will be retired before its term ends, typically caused by a borrower's provision to prepay the loan balance at any time without penalty, impacting the expected returns for investors.
Prepayments in real estate refer to advance payments of expenses like insurance and taxes, which are often funneled into an escrow account.
The preplanning stage of real estate development involves seeking financing and obtaining government approvals prior to beginning architectural drawings.
Prequalifying is an essential step in the home-buying process. It helps buyers estimate the maximum home price they can afford based on their income and liquid assets. While prequalifying does not promise or commit specific financing, it provides an outline of potential affordability.
A presale involves selling properties that are yet to be constructed, such as condominiums. It allows developers to secure financing and gauge market demand before actual construction begins.
Prescription is the process by which certain rights are acquired through long-term, continuous, and open use of a property, particularly in cases of adverse possession. This legal doctrine allows an individual to gain a right or an easement after meeting specific statutory requirements.
Present Value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. PV calculations are fundamental in finance and real estate as they determine what a future amount of money is worth today.
The Present Value of Annuity (PVA) represents the current value of a series of future equal payments, discounted at a specific interest rate, over a set period.
The Present Value of One (PV1) calculates the current worth of a future amount, discounted at a specific interest rate. This concept is pivotal in finance and real estate for determining the value of future cash flows in today's terms.
A preservation district is a zoning designation covering environmentally sensitive areas, parkland, scenic areas, or historic districts, imposing strict limitations on land use to maintain the essential character of these sites.
Pretax income refers to the amount of income that a business or individual earns before any income taxes are deducted. This figure is crucial for determining the net profitability of operations and for financial analysis.
In real estate, 'Price' refers to the amount of money that buyers and sellers agree upon for the exchange of property. While it represents the transactional amount, it can often differ significantly from 'Value,' which is an estimate or opinion of worth provided by an appraiser.
Price fixing is an illegal practice where competing businesses agree to maintain uniform prices for goods or services, including real estate commissions. This anti-competitive behavior is regulated by antitrust laws to ensure fair market practices.
A loan typically used outside the United States, whose payments are adjusted according to the rate of inflation, making payments predictable in terms of real value.
Pride of ownership refers to the sense of well-being, accomplishment, and pleasure derived from owning a home or other real property. It embodies an intangible benefit of homeownership correlated with social status, financial accomplishment, and a commitment to the local community.
A Primary Lease is an agreement between a property owner (landlord) and a tenant that may be partially or wholly subleased to another tenant.
The Primary Market Area (PMA) is a defined geographic region from which a business, such as a retail store or real estate development, expects to draw the majority of its customers or tenants. Identifying and understanding the PMA helps businesses to gauge market demand, optimize marketing strategies, and make more accurate financial projections.
Primary Market Population refers to the population located within a shopping center’s primary trade area. It often forms the majority of the customer base for the shopping center.
The primary mortgage market is where borrowers and lenders come together to originate mortgages. This market includes various institutional lenders such as savings and loan associations, banks, and mortgage bankers and brokers.
A primary residence, often referred to as a principal residence, is the main home where an individual resides most of the time. This contrasts with a second home or vacation home.
A Prime Contractor, also known as a General Contractor, is primarily responsible for the overall coordination of a construction project. This role includes hiring and managing subcontractors, securing necessary permits, ensuring compliance with building codes, and overseeing the project to completion.
The prime rate is the lowest commercial interest rate charged by banks on short-term loans to their most creditworthy customers. It significantly influences other rates, including those for mortgages and consumer loans.
A prime tenant in real estate is the tenant who occupies the most space within a shopping center or office building. These tenants are considered creditworthy and are essential in attracting additional customers or traffic.
The term 'Principal' in real estate can refer to the owner or user of the property, the client of an agent or broker, or the amount of money borrowed in a mortgage, excluding interest.
Principal and Interest Payment (P&I) refers to a periodic payment, usually made monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance, commonly seen with amortizing loans.
The amount owed on a debt, whether it is the original face amount or the remaining unpaid debt on a loan that has been partially amortized.
A Principal Broker is the licensed individual responsible for the overall management and operations of a real estate brokerage firm. They typically receive compensation in the form of profits, a salary, or a percentage of transaction commissions.
The designated city within a Metropolitan Statistical Area (MSA) or Micropolitan Statistical Area (µSA) that serves as the primary city or city center. This designation is used for demographic, economic, and planning purposes.
Principal Meridian is a fundamental concept in the Government Rectangular Survey method of land description used to locate range lines accurately.
In real estate, a principal residence is the main home where a person lives most of the time. Principal residences qualify for specific tax benefits, such as rollover tax treatments.
Principal, Interest, Taxes, and Insurance (PITI) are the four components typically included in a single monthly mortgage payment on an amortizing loan.
Principle (Appraisal) refers to basic economic facts that underpin the theory of valuation in real estate. Key principles include substitution, contribution, anticipation, and highest and best use, which assist in accurately determining a property's market value.
A prior lien is a legally enforceable claim or hold on a property that takes precedence over other liens. It is established before any subsequent liens and typically has higher priority in the event of default.
In real estate, 'Priority' refers to the order in which creditors will be repaid in the event of a foreclosure. This can significantly impact which stakeholders are paid first and who might not receive any repayment if funds are exhausted.
Private covenants, often referred to as deed restrictions, are legal obligations imposed in a deed that restrict the use or activities that may be conducted on property. These covenants are designed to maintain a certain level of standard or uniformity within a development area or neighborhood.
Private Mortgage Insurance (PMI) is a type of insurance specifically designed to protect lenders in case a borrower defaults on a mortgage. It is often required for homebuyers who seek a conventional loan with a down payment of less than 20%.
Understanding the conditions and implications of a Private Mortgage Insurance (PMI) default can prevent homeowners from stakeholders from encountering unwanted financial hardships. Private Mortgage Insurance (PMI) is an insurance provided by private companies on conventional loans, ensuring lender protection in case of borrower default, especially when higher loan-to-value ratios are involved.
Private placement is an investment approach where a security is sold directly to a small group of private investors, generally under exemptions to registration provided by the Securities and Exchange Commission (SEC) and state securities laws.
The Private Sector encompasses all economic activities that are not under government control or management, including businesses, individuals, and organizations that operate for profit.
PRIZM (Potential Rating Index for Zip Markets) is a market segmentation tool utilized by marketers to identify target demographics for various products and services. Developed by Claritas, it categorizes populations based on socioeconomic data, housing, and lifestyle attributes.
Pro rata is a Latin term meaning 'in proportion' or 'according to the rate.' In a real estate context, it refers to the equitable distribution of costs, profits, or liabilities based on the share of ownership or participation.
A pro-forma statement is a financial document that projects future income and expenses for a property, enabling investors and developers to make informed decisions based on estimated financial performance.
Probate is the judicial process through which a will is validated and executed to ensure the legal transfer of the deceased's estate to the rightful beneficiaries.
Proceeds from resale refer to the total amount of money received from selling a property, after accounting for any associated costs and expenses.
Procuring cause is a legal term used primarily in real estate to determine if a broker is entitled to a commission. It signifies the actions of a broker that ultimately lead to the creation of a transaction or agreement.
In the realm of real estate, a production builder constructs homes based on pre-designed plans and specifications, often creating multiple houses using an assembly-line process. This method contrasts with custom builders, who craft unique homes tailored to individual needs.
Progress payments are partial payments made to a contractor or builder as specific stages of a construction project are completed. These payments are contingent on the fulfillment of predefined milestones, ensuring that the contractor receives payment for the work completed to date without having to wait until the entire project is finished.
Progressive taxation is a tax system where the tax rate increases as the taxable amount increases. This taxation method aims to distribute the tax burden more equitably, making wealthier individuals or entities pay a higher portion of their income or assets.
A depiction of the future based on a specific set of assumptions, commonly used in real estate for anticipating financial performance, market conditions, and project outcomes.
The projection period refers to the time duration over which future cash flows and resale proceeds from a proposed real estate investment are estimated. It plays a crucial role in evaluating the potential profitability and financial viability of real estate ventures.
A promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date.
Property refers to the legal rights an individual or entity has over certain resources, including real estate and personal belongings. These rights allow the owner to use, enjoy, and dispose of their property as they see fit, subject to certain restrictions enforced by law.
A Property Condition Addendum or Clause is a section within a real estate contract detailing the state of the property being sold and setting the terms under which repairs and maintenance should be completed.
A property description provides a detailed summary of the features, boundaries, and legal status of a particular real estate property. It ensures accurate identification and transference of property rights.
The defined boundary which delineates the edge of a plot of land, typically legally recognized and recorded in public land records.
Property management encompasses the oversight and operations necessary to maintain real estate properties, including rent collection, maintenance, and financial management.
A Property Report is a mandatory document for the sale of subdivisions of 50 lots or more, as required by the Interstate Land Sales Full Disclosure Act (ILSA). This report must be filed with the Office of Interstate Land Sales Registration (OILSR) under the U.S. Department of Housing and Urban Development (HUD).
The Property Residual Technique in appraisal is a method used to estimate the value of a property based on its potential future income and the reversionary value of the building and land.
A government levy based on the market value of privately owned property, commonly referred to as ad valorem tax or real estate tax.
A property tax deduction allows homeowners to deduct property taxes assessed on their real estate holdings from their annual income taxes, reducing overall tax liability.
Proportional taxation, also known as a flat tax, is a tax system where the tax rate remains constant regardless of the individual's income level. Unlike progressive or regressive tax systems, proportional taxation applies an equal tax rate to every taxpayer.
A proprietary lease in a cooperative apartment building is an agreement granted by the corporation to its stockholders, which entitles them to rent or use a specific apartment unit upon meeting the conditions outlined.
Proprietorship refers to the ownership of a business, including income-producing real estate, by an individual, as opposed to a partnership or corporation. This ownership structure allows for direct control of property and income but comes with specific risks and benefits.
Prorate refers to the process of dividing or distributing an amount proportionately between parties, commonly used in real estate for allocating property taxes, insurance, or other periodic charges between the seller and buyer.
Proration refers to the division of expenses or income proportionally based on the time used or the amount consumed between parties in a real estate transaction. This ensures fair allocation of costs such as property taxes, utilities, and homeowner association fees based on the agreed terms.
A prospect in real estate is an individual or entity considered likely to purchase a property. Prospects are typically leads who have shown interest in a property by requesting further information or visiting a listing.
