Active Participation is a type of investor position that influences how rental income is taxed. The requirements for active participation are less stringent than for material participation.
An annuity factor is a mathematical figure that shows the present value of an income stream that generates one dollar of income each period for a specified number of periods.
An assignment of rents is a legal agreement transferring the right to collect rent or income generated by a property from the borrower to the lender in the event of a default on the mortgage.
A basement suite, also known as an accessory apartment, is a separate living area typically located in the basement of a single-family home. It usually includes sleeping, cooking, and bathroom facilities.
The Break-Even Point in real estate is the rental income or occupancy level necessary to cover all operating expenses and debt service, ensuring that the property does not operate at a loss.
Cash flow refers to the periodic amounts available to an equity investor after deducting all periodic cash payments from rental income, providing insight into the liquidity and operational viability of a real estate investment.
A Cash Flow Mortgage is a unique debt instrument where almost all income from property rental is used to pay the lender, typically with no interest rate specified.
A Commercial Mortgage Loan is a loan secured by real estate that generates business or rental income, typically used in transactions involving commercial properties like office buildings, shopping centers, or warehouses.
A condotel is a type of property that combines elements of both condominiums and hotels. Individual units within the property are sold to individual owners who can use the property when they choose and participate in a rental program when they are not using it.
Contract Rent refers to the amount of rent that has been explicitly agreed upon in a lease or rental agreement between a tenant and a landlord. It remains fixed over the term stated in the contract unless otherwise adjusted according to specified conditions.
Deficit Rent refers to the difference between the market rent and the contractual rent for a specific property. It can indicate potential income loss for property owners when actual collected rent is less than the prevailing market rates.
A duplex is a type of multi-family home that features two distinct living units within one building and a single structure.
Economic life refers to the remaining period for which real estate improvements are expected to generate more rental income than their operating expenses.
Economic Occupancy refers to the effective occupancy rate of property units based on units rented for money, rather than the physical occupancy, which simply counts the number of occupied units regardless of whether rent is being paid.
Economic rent refers to the excess payment made to a factor of production over and above the amount needed to bring that factor into production. This term is often used in economics and appraisal contexts.
A Four-Plex is a type of residential building configuration that contains four separate dwelling units. It offers opportunities for both living in one unit and renting out the others or renting all four units for income.
Gross income represents the total income generated from property or other sources before any expenses or deductions are applied. It includes rental income, alimony, retirement benefits, and various other income streams.
The Gross Income Multiplier is a tool used in real estate valuation to compare properties by evaluating the price of a property relative to its gross rental income.
Gross Possible Rent (GPR), also known as Potential Gross Income (PGI), represents the maximum rental income a property could generate if it were entirely occupied year-round with zero vacancies.
The Gross Rent Multiplier (GRM) is a simplified ratio used by real estate investors to evaluate the potential profitability of an income-generating property. It is calculated by dividing the property's purchase price by its gross annual rental income.
The Gross Rent Multiplier (GRM) is a metric used by real estate investors to evaluate the potential profitability of an investment property based on its rental income.
A Guesthouse, also known as an accessory apartment, is a secondary housing unit on a single-family residential lot. These units provide additional living space and can serve a variety of purposes, including housing for guests, rental income, or living space for extended family.
The Income Multiplier, also known as Gross Rent Multiplier, is a valuation method that establishes the relationship between a property’s purchase price and its gross rental income. It is commonly used to assess the attractiveness of an income-generating property investment.
Income Property refers to real estate that is specifically utilized to generate rental income. It encompasses a variety of property types that can provide steady income streams to the owner.
An income stream refers to a regular flow of money generated by a business or investment. It can come from various sources such as rentals, dividends, interest, or any other form of residual income.
Investment properties are real estate assets purchased with the intention of earning a return on investment. This can be through rental income, the future resale of the property, or both.
A landlord is a property owner who rents out their property to a tenant in exchange for rent. They have the right to lease property for a specific time period while earning rental income.
Leased Fee refers to the landlord's ownership interest in a property that is under lease. It's the structure for defining income from rental property, emphasizing the importance of anticipated rental income for assessing value.
Leased fee value represents the worth of a property to the landlord based on the current rental agreements in place. It's crucial for understanding property valuation under existing lease conditions.
A management agreement is a contract between a property owner and a manager, detailing responsibilities for leasing, operating, and managing the property. It often includes a fee structure ranging from 2-6% of the rental income.
The management fee is the cost charged by a professional property management company for overseeing and managing rental properties. It is typically a fixed percentage of the total rental income generated by the managed property.
Market rent refers to the rental income a property can be expected to earn in the open market under typical conditions. It is contrasted with contract rent, which is the actual rent agreed upon by both parties.
Net Leasable Area (NLA) represents the precise space within a commercial property that can be rented to tenants. It is a critical metric for landlords and investors when estimating potential rental income.
Periodic cash flow refers to the regular intervals of revenue generation and expenses within a specific timeframe for a real estate investment, providing insights into the liquidity and profitability of the property.
Positive cash flow in real estate indicates that rental income exceeds property-related expenses, ensuring profitability and sustainability.
A quadraplex, also known as a four-plex, is a type of real estate property that consists of four separate units within one building. Each unit can be rented out individually, offering multiple income streams for property investors.
Rent escalation refers to a provision in a lease agreement that allows for periodic increases in the rental rate.
A Rent Roll is a detailed list of individual tenants within a property, typically including information such as unit numbers, lease agreements, monthly rents, and lease expiration dates. It serves as a critical document for property management, providing an overview of rental income and tenant occupancy status.
Rental income represents the actual amounts collected from tenants for the use of space. It does not include miscellaneous income such as laundry income or special fees. Understanding rental income is crucial for real estate investors and property managers to gauge the profitability of a property.
A secondary suite, also known as an accessory apartment, is a self-contained dwelling unit within or attached to a primary residential building, designed to house tenants or relatives while providing rental income to the homeowner.
