Investment Glossary

BUY

Strong recommendation to proceed with the investment. The property meets all key criteria and presents a favorable risk/reward profile.

CONDITIONAL BUY

Proceed with caution. The investment is viable but has specific conditions or risks that need to be addressed or monitored.

Example: Conditional buy if tolerant of near-term rent softness.

HOLD

Wait and observe. Market conditions or property specifics suggest waiting before making a decision.

PASS

Not recommended at current conditions. The investment does not meet key criteria or presents unfavorable risk/reward.

REJECT

Strong recommendation against the investment. Significant red flags or deal-breakers have been identified.

Cap Rate

The ratio of Net Operating Income (NOI) to property value. Used to estimate the return on an investment property, assuming all-cash purchase.

Example: A property with $16,500 NOI and $450,000 value has a 3.7% cap rate.

Cash-on-Cash Return

Annual pre-tax cash flow divided by total cash invested. Measures the return on actual cash put into the deal.

Example: If you invest $100,000 and receive $6,000 annual cash flow, your cash-on-cash return is 6%.

Gross Yield

Annual rental income divided by property price, before expenses. A quick way to compare properties.

Example: A $500,000 property renting for $2,500/month ($30,000/year) has a 6% gross yield.

Net Yield

Annual rental income minus operating expenses, divided by property price. More accurate than gross yield.

NOI

Net Operating Income - Gross rental income minus operating expenses (excluding debt service and income taxes). The property's profit before financing costs.

IRR

Internal Rate of Return - The annualized return that accounts for the timing of all cash flows, including purchase, operating income, and sale. The most comprehensive return metric.

Example: A 12% IRR over 5 years means your investment grew at 12% annually when accounting for all cash flows.

ROI

Return on Investment - Total return divided by total investment. Can be expressed as total or annualized.

Entry Price

The purchase price of a property at the time of acquisition. This is the baseline value used to calculate returns, yields, and appreciation over time.

Example: An entry price of $450,000 means you purchased the property for $450,000 before closing costs and fees.

Equity Multiple

Total cash received divided by total cash invested. Shows how many times you get your money back.

Example: An equity multiple of 1.8x means you receive $1.80 for every $1.00 invested.

Amortization

The loan repayment schedule. Longer amortization means lower monthly payments but more interest paid over time.

Debt Service

Monthly or annual mortgage payments, including principal and interest.

Down Payment

The initial cash payment when purchasing a property. The remainder is typically financed through a mortgage.

DSCR

Debt Service Coverage Ratio - NOI divided by annual debt service. Lenders use this to assess if the property can cover loan payments. Typically 1.25+ is required.

Example: DSCR of 1.25 means NOI is 25% higher than the annual mortgage payments.

HELOC

Home Equity Line of Credit - A revolving line of credit secured by property equity. Allows you to access equity without selling.

Leverage

Using borrowed money (mortgage) to amplify returns. Increases both potential gains and risks.

LTV

Loan-to-Value - The loan amount as a percentage of the property value. Higher LTV means more leverage but also more risk.

Example: 70% LTV on a $500,000 property means a $350,000 loan and $150,000 down payment.

Negative Leverage

When the cost of borrowing (mortgage rate) exceeds the property yield. The mortgage actually reduces your returns.

Example: If your cap rate is 4% but mortgage rate is 6%, you have negative leverage.

Non-QM

Non-Qualified Mortgage - A loan that does not meet the standard federal criteria for a "qualified mortgage," frequently used by foreign or non-resident investors.

Example: Non-QM lenders provide specialized financing options for investors who may not meet traditional domestic credit requirements.

Appreciation

Increase in property value over time. Can be due to market forces, improvements, or inflation.

BPO

Business Process Outsourcing - Contracting non-primary business functions to a third-party provider; often a major driver of rental demand in emerging urban markets.

Example: Areas with high BPO expansion typically see strong mid-income rental demand.

Comparable Properties

Similar properties used to estimate market value or rental rates. Should be similar in size, condition, location, and features.

Comps

Short for Comparable Properties - Similar properties used to estimate market value or rental rates.

DOM

Days on Market - Average number of days a property remains active before a contract is signed.

Example: A high DOM indicates a buyer-favored market where properties take longer to sell.

Market Cycle Phase

The current stage of the real estate market cycle: Peak (highest prices, low inventory), Correction (prices declining), Recovery (prices stabilizing/rising from bottom), or Stagnation (flat prices, low activity).

Market Phase

Categorizes the current stage of the local real estate cycle (e.g., Correction, Recovery, or Expansion).

Example: Understanding the Market Phase helps investors determine if they are entering during a period of stabilization or growth.

Market Status

Indicates whether the market favors buyers or sellers. A Buyer's Market has excess inventory, giving buyers negotiating power and lower prices. A Seller's Market has limited supply, allowing sellers to demand higher prices. A Balanced Market has equilibrium between supply and demand.

Example: In a Buyer's Market, properties may sit longer on the market, allowing for negotiation. In a Seller's Market, multiple offers and bidding wars are common.

OFW

Overseas Foreign Worker - Citizens working abroad whose remittances significantly drive residential demand in their home country.

Example: Remittances from workers abroad act as a core driver for mid-income property absorption in specific regions.

Supply Pipeline

New construction projects in development that will add inventory to the market. High supply pipelines can pressure rents and prices.

Vacancy Rate

Percentage of rental units that are unoccupied. Higher vacancy rates indicate weaker demand or oversupply.

Example: A 10% vacancy rate means 10% of units are empty at any given time.

LOW Risk

Investment with stable cash flows, established markets, and minimal downside exposure. Suitable for conservative investors.

MEDIUM Risk

Balanced risk/reward profile with some uncertainty but reasonable protection against downside.

MEDIUM-HIGH Risk

Above-average risk with potential for higher returns. May involve market timing, value-add strategies, or emerging markets.

HIGH Risk

Significant uncertainty or volatility. Higher potential returns but also substantial downside risk. Suitable for aggressive investors only.

Capital Gains Tax

Tax on profit from selling an asset. Rates vary by country and often depend on how long you held the property.

CGT

Capital Gains Tax - Tax on profit from selling an asset.

DST

Documentary Stamp Tax - A tax on documents evidencing the transfer of property or legal obligations.

Example: Closing costs in specific international markets often include a percentage-based DST fee.

EB-5

Investor Visa - A U.S. residency program requiring significant capital investment, often noted as a benchmark for high-net-worth residency paths.

Example: Standard residency paths like the EB-5 usually require investments exceeding $800k.

EIN

Employer Identification Number - US tax ID for business entities. Required when purchasing through an LLC.

FIRPTA

Foreign Investment in Real Property Tax Act. US law requiring 15% withholding on gross sale proceeds when foreign persons sell US real estate.

Income Tax

Tax levied on rental income earned from investment properties. Rates and deductions vary by country and may differ for foreign investors.

Example: In Portugal, rental income is taxed at 28% flat rate, or can be added to progressive income tax brackets if beneficial.

ITIN

Individual Taxpayer Identification Number - US tax processing number for individuals who don't qualify for a Social Security Number. Required for foreign investors.

LLC

Limited Liability Company - Business structure that provides liability protection and may offer tax advantages for property ownership.

LTCG

Long-Term Capital Gains - Tax rates applied to profits from the sale of an asset held for more than one year, typically lower than standard income tax.

Example: Investors can leverage LTCG rates by holding an asset for several years to optimize after-tax returns.

POA

Power of Attorney - Legal document authorizing someone to act on your behalf. Essential for remote property purchases.

Property Tax

Annual tax based on property value, paid to local government. Varies significantly by location.

PTT

Property Transfer Tax - A tax paid to a local or provincial government when an interest in real property is acquired.

Example: Buyers should factor in PTT and any applicable foreign buyer surcharges when calculating total acquisition costs.

RON

Remote Online Notarization - Digital notarization via video conference. Enables remote property closings without physical presence.

RPT

Real Property Tax - The annual local tax paid on the value of owned real estate, used to fund local infrastructure and services.

Example: Annual RPT is a recurring expense that should be factored into net yield calculations.

Transfer Tax

Tax paid when property ownership transfers. Can be paid by buyer, seller, or split. Also called stamp duty in some countries.

GDP Growth

Gross Domestic Product Growth - The annual percentage change in a country's total economic output. Positive GDP growth typically supports property values and rental demand.

Example: A country with 3% GDP growth indicates a healthy, expanding economy favorable for real estate investment.

Central Bank Rate

The benchmark interest rate set by a country's central bank. It influences mortgage rates, borrowing costs, and overall economic activity.

Example: If the central bank rate is 5%, mortgage rates typically range from 6-8% depending on the lender.

Inflation Rate

The annual percentage increase in the general price level of goods and services. Moderate inflation can benefit property owners as asset values and rents tend to rise with inflation.

Example: An inflation rate of 2-3% is considered healthy; higher rates may erode real returns unless rents adjust accordingly.

SFH

Single-Family Home - A standalone residential property designed for one household. Often preferred for appreciation potential.

Duplex

A multi-unit residential building with 2 units. Often called "small multifamily."

Triplex

A multi-unit residential building with 3 units.

Fourplex

A multi-unit residential building with 4 units.

Example: A duplex with two 2BR units might rent for $3,000/month total.

STR

Short-Term Rental - Properties rented for short periods (typically less than 30 days), often through platforms like Airbnb. Higher income potential but more management required.

Stress Test

Analysis of how an investment performs under adverse conditions (rent decreases, vacancy increases, etc.).

Example: A stress test might model a 20% rent drop to see if the property remains cash-flow positive.

Break-Even Horizon

The time required to recover your initial investment or for the property to become profitable.

Break-Even

The point where total income equals total costs. No profit or loss.

Remote Feasibility Score

Rating (1-10) of how easily a property can be purchased and managed from abroad. Considers digital notarization, POA acceptance, and property management availability.

Investor Profile

Classification of investor risk tolerance: Conservative (low risk, stable returns), Balanced (moderate risk), or Aggressive (high risk, high potential returns).

Effective Entry Cost

Total cash required as a percentage of purchase price, including all fees and taxes.

Example: 107% effective entry cost means you need $535,000 for a $500,000 property.

Maximum Loss

The worst-case scenario loss under stress test conditions.

Gross Rental Income

Total rent collected before any expenses are deducted.

Operating Expenses

Costs to operate the property: property management, maintenance, insurance, utilities (if included), HOA fees.

Vacancy Allowance

Estimated income loss from vacant periods between tenants. Typically 5-10% of gross rent.

PM

Property Manager - Company or individual that handles day-to-day property operations: tenant finding, rent collection, maintenance coordination.

PM Fee

Property management fee, typically 8-10% of gross rent for residential properties.

Cash Flow

The net income remaining after all expenses and debt service. Positive cash flow means the property generates income after all costs.

Monthly CF

Monthly Cash Flow - The net income remaining each month after all expenses and debt service.

Annual CF

Annual Cash Flow - The net income remaining each year after all expenses and debt service.

Optimal Exit

The projected timeline recommended to sell a property to achieve the best balance of capital appreciation and tax efficiency.

Example: Reports typically identify an Optimal Exit timeframe based on local tax laws and forecasted market trends.