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12 Terms All Real Estate Investors Should Know

INVESTOR TERMS HEADER

Just like any other space, the real estate sector has its jargon and unique terminology. So, a landlord should have a basic grasp of the most important real estate terms or jargon.

Using these words will also help you communicate successfully with your colleagues in the real estate industry. This is why we at Florida Property Management & Sales have put together this article.

So, here is a list of the most frequently used terms and their definitions:

Realtor

A realtor is a real estate professional who is also a member of the National Association of Realtors. Realtors must obey the standard of conduct of the association in addition to all local and state regulations.

realtor

Real Estate Broker

A broker is a certified professional who can act as a middleman between two parties during a real estate transaction. The critical distinction is that a broker can work independently, whereas a realtor or real estate agent must work for a broker.

Real Estate Agent

Real estate agents are certified professionals that represent parties in a property purchase. Real estate agents work under the guidance of a broker once they have received the relevant permits.

Seller’s and Buyer’s Market

Higher pricing and increased buyer rivalry are the characteristics of a seller’s market, which arise because the market’s supply of available properties considerably outweighs the market’s demand.

Buyer’s markets, in contrast to seller’s markets, exhibit lower pricing and plenty of different properties to pick from.

Single-Family and Multi-Family Property

A single-family home is a residential property with no shared walls that are not connected to any other properties. Whereas multi-family properties contain numerous different households in separate units within a single building.

Pre-Approval Letter

The pre-approval process is crucial. This communication from your creditor should arrive before you start looking for a home and applying for a loan. As a result, you’ll know how much you can spend.

approval letter

Return on Investment (ROI)

The ROI calculation estimates a percentage value of an investment’s profitability. The formula is simple: Percentage Value or ROI equals (Net Profit/Cost of Investment) times 100.

As a result, if the return on investment is positive, a property is worthwhile. Negative ROI indicates a net loss, which is a poor indicator for investors. Ideally, property investors should strive for roughly 10 to 12 percent ROI.

Multiple Listing Service (MLS)

In the United States, there are close to a thousand MLS services. These offer support and reimbursement made by real estate brokers to other real estate agents.

But not every property on the market is listed on an MLS database. Furthermore, only certified real estate agents who are affiliates of a real estate association are permitted to list properties on an MLS.

For Sale by Owner (FSBO)

This refers to a property owner who sells their home without the help of a real estate agent. When the market is hot, an owner may not see the need for an agent or may not be able to finance the commissions if they have little equity built up.

In either case, investors may be interested in this listing type as it’s a win-win situation should any savings can be passed on to the buyer.

But buyers should be aware that properties that are not listed through an agent expose them to some risk. Private owners, unlike agents, are not held to a code of ethics. So, investors should be vigilant and conduct additional due diligence.

Principal, Interest, Taxes, and Insurance (PITI)

PITI stands for principal, interest, taxes, and insurance, all of which are included in a mortgage payment.

PITI gives investors a complete picture of any expenses as a single number, which they can use to evaluate cash flow when combined with operating expenses.

Many investors overlook insurance premiums and taxes when calculating a property’s profit potential, resulting in an erroneous picture of the property’s profit potential.

Gross Rental Income (GRI)

Your rent value plus additional fees or expenditures paid by the renter to the landlord equals gross rental income. Security deposits paid by the tenant, on the other hand, are not refundable. So, they are not counted as income as they may have to be returned to the tenant.

GRI is a tool that investors use to estimate the range of potential income a property could provide. Investors can calculate adjusted gross income using the GRI and then subtract expenditures.

Fair Market Value (FMV)

This refers to the price a house would sell at on the open market if the buyer and the seller were free of pressure and both sides are knowledgeable, it is referred to be an open market.

As a result, comparing FMV to the given price of a property determines if you are receiving a decent deal or not.

Remember that the fair market value (FMV) is not the same as the appraised value utilized for tax reasons. Investors can use a third-party assessor, a real estate agent, or a broker price opinion to determine the FMV.

fair value

Bottom Line

Do you need a property manager in Florida you can rely on to get the job done and land you some high-quality renters?

If that’s the case, you’ve come to the right place. Florida Property Management and Sales is ready and willing to assist you.

We not only enjoy what we do, but we’ve also established ourselves as industry leaders over time. So contact us by phone at (954) 752-4800 or email us at management@floridapropertyrealty.com today!