Real Estate Investing Terms You Need to Know
Real estate investing has its own language. Here are the most important terms explained simply so you can invest with confidence.
Returns and Performance
Cap Rate (Capitalization Rate)
Annual return on a property based on income divided by value. Formula: NOI / Property Value. A 10% cap rate means $10 return per $100 invested.
Cash Flow
Money remaining after all expenses are paid from rental income. Positive cash flow means the property earns more than it costs each month.
Cash on Cash Return
Annual cash flow divided by total cash invested. Measures actual return on money you put in rather than total property value.
ROI (Return on Investment)
Total return as a percentage of amount invested. Pie Assets targets up to 15% annual ROI combining rental income and appreciation.
Gross Rental Yield
Annual rental income divided by property value. Quick comparison metric before deducting expenses.
Net Rental Yield
Annual rental income minus expenses divided by property value. More accurate than gross yield.
Income and Expenses
NOI (Net Operating Income)
Rental income minus operating expenses before mortgage payments. The foundation of property valuation.
Gross Rental Income
Total rental income before any expenses. Starting point for financial analysis.
Operating Expenses
Costs of running a property including management fees, insurance, taxes, and maintenance. Does not include mortgage payments.
Vacancy Rate
Percentage of time a property sits empty. Lower is better. Section 8 properties typically have lower vacancy rates.
Property Value
Appreciation
Increase in property value over time. One of the two main ways real estate investors make money alongside rental income.
Equity
Difference between property value and what is owed. Grows as mortgages are paid down and property appreciates.
ARV (After Repair Value)
Estimated value of a property after renovations. Important for fix and flip investors.
Comparative Market Analysis (CMA)
Analysis of similar properties to determine fair market value. Used to price properties accurately.
Financing Terms
Down Payment
Upfront cash when buying a property. Traditional real estate requires 20%. With Pie Assets fractional investing no large down payment is needed.
Leverage
Using borrowed money to increase potential returns. Real estate is one of the few assets where leverage is commonly used by everyday investors.
Amortization
Process of paying off a loan through regular payments over time. Each payment covers both principal and interest.
LTV (Loan to Value)
Loan amount divided by property value. Lower LTV means more equity and lower risk for lenders.
Investment Strategies
Fractional Investing
Owning a share of a property instead of the whole thing. Pie Assets lets anyone own fractional shares with low minimums and no landlord duties.
Buy and Hold
Purchasing properties to rent long term. Generates passive income and builds equity over time. The strategy behind Pie Assets properties.
Fix and Flip
Buying undervalued properties, renovating, and selling for profit. Active strategy requiring significant capital and time.
House Hacking
Living in one unit of a multi-family property while renting others. Tenants help pay your mortgage.
BRRRR Method
Buy, Rehab, Rent, Refinance, Repeat. Strategy for building a portfolio by recycling capital through refinancing.
Government Programs
Section 8 / Housing Choice Voucher Program
Federal program where government pays rent directly to property owners on behalf of low income tenants. Provides stable government-backed income to investors.
FHA Loan
Government-backed mortgage requiring only 3.5% down. Popular for first time buyers and house hackers.
Opportunity Zone
Designated low income area offering significant tax benefits for investors who invest in properties there.
