Investor Glossary

The estimated market value of a property after all planned renovations are complete, typically supported by comparable sales.

Why it matters: Lenders use ARV to cap leverage on fix and flip and rehab deals. Overstating ARV reduces your margin of safety and can limit financing.

A ratio comparing a property's monthly rental income to its full monthly housing payment (PITIA). Formula: monthly rent ÷ monthly PITIA.

Why it matters: DSCR is the primary qualification metric for rental property loans. A higher ratio means more income cushion relative to debt service.

The loan amount divided by the property value, expressed as a percentage. Used for acquisitions, refinances, and leverage caps.

Why it matters: LTV determines how much equity you need to bring to a deal or how much capital you can pull out on a refinance.

The loan amount divided by the total project cost (purchase plus rehab), expressed as a percentage.

Why it matters: LTC is a key leverage metric on fix and flip and construction deals. It reflects how much of the total project cost the lender will finance.

Rental income minus operating expenses (excluding debt service). Used to evaluate commercial and multifamily property performance.

Why it matters: NOI drives valuation on income-producing property. Lenders and appraisers use it to assess whether a deal supports the requested financing.

Net operating income divided by property value, expressed as a percentage. A common metric for comparing income property returns.

Why it matters: Cap rate helps investors and lenders quickly compare properties and assess whether purchase price aligns with income potential.

A plan for releasing rehab or construction funds in increments as work is completed and verified, rather than funding the full budget upfront.

Why it matters: Understanding draws helps you plan contractor payments and cash flow during a rehab or build. Incomplete work can delay the next draw.

Short-term financing used to acquire or hold property until a permanent exit — sale, DSCR refinance, or stabilization — is achieved.

Why it matters: Bridge capital lets investors move quickly on acquisitions or manage transitional properties without committing to long-term debt prematurely.

Asset-based private financing, often short-term, secured by real property. Commonly used for fix and flip, bridge, and construction.

Why it matters: Hard money prioritizes the deal and collateral over traditional income documentation — useful when speed and flexibility matter more than the lowest rate.

The planned path to repay short-term financing — typically sale, DSCR refinance, or permanent takeout — documented before closing.

Why it matters: Every short-term loan needs a credible exit. Lenders and advisors review your exit plan to assess whether the financing structure fits your timeline.

Annual net operating income divided by loan amount, expressed as a percentage. Formula: NOI ÷ loan amount.

Why it matters: Commercial lenders often use debt yield as a rate-independent check on loan proceeds. It does not replace DSCR or LTV.

Annual cash flow after debt service divided by cash invested, expressed as a percentage.

Why it matters: Cash-on-cash is a levered equity yield for the modeled year. It moves with financing even when cap rate stays the same.

The point at which a property’s occupancy, income, and operations are close enough to a normalized run-rate for permanent or DSCR-style takeout underwriting.

Why it matters: Bridge and value-add files often depend on a credible path to stabilization. Unstabilized income should not be treated as current coverage.

Loan proceeds reserved and released later—commonly for construction, repairs, or conditions—rather than fully funded at closing.

Why it matters: Interest and cash planning should follow what is outstanding, not only the committed loan amount. Confirm what is held back and when it can be drawn.