Welcome to the Real Estate Investment Terms From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. There were not too many key terms for the letters J and K, so we’ve come back with a vengeance with today’s letter……L!

This week our feature words are lease, lenders, leverage, liability, lien, line of credit, loan, loan origination fee and loan to value.

A lease is a contract that spells out the terms of an agreement between a landlord and a renter. This agreement will state the amount of rent that the tenant must pay and the amount of time the property will be rented. The lease will also list what the landlord’s responsibilities are to the tenant, and what the tenant’s responsibilities are to the landlord.

A lender is an institution that lends money to an individual or a company to secure property. A lender could be a mortgage company, a bank, a private person or a group of people.

When you leverage a property you are putting a mortgage on the property for the purpose of using the equity to purchase another property or making another business transaction. Leveraging allows you to avoid using your own money to advance your business forward.

Your liability is your exposure or risk that you have in a business transaction. You want to keep your risk or liability as low as possible. In the event the deal goes bad, you don’t lose too much equity or money.

A lien is the mortgage that is held on a property. A lien or mortgage holds the property as collateral until the monies are paid back in full.

A line of credit can be secured or unsecured. If secured, the line of credit would be a home equity line of credit. This loan would be secured by the real estate. If the line of credit is unsecured, then there is no collateral. The difference between a line of credit and a mortgage is when the line is paid off or down, that amount paid is available for use again. When a mortgage is paid off, those monies are no longer available.

A loan is a lien placed on a property that is being used as collateral to secure the monetary security.

A loan origination fee is the fee the lender charges to do the loan. This fee is a percentage of the total loan amount. It also can be negotiated to a lower percentage.

The loan-to-value (LTV) is the ratio between the loan and the appraised value of the property. If the LTV is 90% of a property that is valued at $100,000, then the loan would be $90,000.

That’s all for this week. The next group of real estate investment terms will all begin with the letter “M”.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……I!

This week our feature words are income property, interest rate, internal revenue service and inflation.

An Income Property is the real estate you purchase to provide steady income to your business. It could be a condo, townhouse, single family home or an apartment building. No matter what type of real estate you purchase, the goal is to buy the property at a good price, rent it for an amount that covers all your monthly expenses (mortgage, utilities, taxes, insurance, etc.), plus give you some extra money in your pocket.

The Interest Rate is the amount of interest a lender charges on the money you borrow. This is how the lenders make their money in the transaction. Based on the strength of your credit, the interest rate may be negotiated. An amortization table will calculate the amount of interest you’ll pay over the life of the loan. Your goal is to get the lowest interest rate possible, so you save money in the long term.

The Internal Revenue Service (IRS) is the government agency responsible for collection of taxes. They make sure you are filing and paying your fair share of taxes. As a business owner, you pay taxes to the IRS just like an individual would. Different forms are required and different deductions will apply, but you still must file taxes stating the income you made from your business. The IRS is your silent partner and you want to be sure they don’t feel slighted. Make sure you have an accountant that is well versed in real estate investing to filing your business taxes.

Inflation may affect your real estate investing business in different ways. It refers to the buying or purchasing power of your money. When inflation is high, you can’t purchase as many products or services for the same amount of money as you might have in the past. This may apply to materials you buy for a rehab, fees for a contractor or for properties that you purchase. Low inflation numbers mean you’re getting good value for every dollar you spend.

That wraps up our real estate investing terms for this week. Next time we’ll talk about joint ventures, judicial foreclosures and junkers.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……H!

This week, we’ll cover Hard Money Lenders, Housing and Urban Development (HUD), Home Equity Loan, Home Inspection and Holding Costs. It’s been a while since we covered the “G” words so let’s jump right into it!

A Hard Money Lender is a lender who will lend money on projects that the banks and other typical lenders will not. For this service their closing cost and interest rates are generally much higher than other lenders. These loans typically are only for a short period of time, a year or so, and then they need to be refinanced or paid in full.

Housing and Urban Development or HUD is a government department that administers the FHA and FNMA loan programs. They are a source of foreclosed homes that you should be investigated as part of your due diligence.

A Home Equity Loan is a mortgage that is secured by the equity in a property. The equity is determined by the difference between the appraised value and the mortgaged amount owed on the property. Home equity loans can be used to finance portions of another property or make repairs on an existing property.

Typically a Home Inspection is done by an independent company that determines the condition of a property before a buyer goes to settlement. If this inspection finds major damage to the structure of the property, the seller may have to make repairs or the buyer may decide to back out the deal.

Holding Costs are the monies needed to float the project until it starts marking a profit. All the costs that are expended until the project can sustain itself such as; taxes, mortgage payments, etc. For example, if you purchase a property and fix it up, but cannot find a renter quickly, the mortgage payments, utilities and other payments you make until you get a renter are considered holding costs.

That’s it for this week. We’ll get back on track next week and talk about the “I” words you need to know to be a successful investor.

This post is in response to the Poll Question entitled, “What One Thing Would Help You The Most In Your Real Estate Business Right Now?” There was an overwhelming response to the choice….”A mentor to help guide me through the process”. I’m glad that many people see the value in having someone to help them make the right choices and limit their mistakes.

I’m working on making this site a growing community, where everyone can learn from all the contributions to this site, whether it is poll responses, email questions or post comments. All experiences, good and bad, are learning tools that we can benefit from. That’s why I encourage everyone to register for the free email course on this site, and join my face book fan page that is linked from this site.

Please continue to email your questions and comments. They provide so much value to the overall community. They will be answered through a post, podcast, article, or even a video. I’m very excited with the progress we’re seeing on the site and look forward to helping you achieve your financial dreams.

Buy and hold real estate investing is defined, contrasted with other real estate investing strategies, and laid out in an implementation plan, all in this podcast. Buy and hold is the perfect strategy for the current economic conditions. Ronnie explains how he’s used this strategy in the past, and provides the steps required to incorporate this strategy into your real estate investing business.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……G!

The words for this week are: Good Faith Estimate, General Contractor, and Guarantor. Short and sweet this week

A Good Faith Estimate is the cost a contractor would submit as a bid to perform a certain unit of work. This estimate is generally good, or honored, for a specific time period before it expires. You can have a number of contractors submit these estimates, and you can choose the best price for your purposes. Good faith estimates are also used by mortgage companies to estimate the costs you will incur at closing (points, fees, etc.).

A General Contractor is a company that will contract out the required work to subcontractors, who will perform the different units of work. A general contractor rarely performs the work with their own work force. They usually contract with other companies, then supervise the job to it’s completion. The general contractor adds a percentage to the overall cost of the job as their fee. You can keep the cost of the job low if you act as your own general contractor and sub the work out yourself.

A Guarantor is one who provides a warrant or guarantee to another. A guarantor is going to guarantee that the service or merchandise you’re supposed to receive is rendered.

Not many words, but important nonetheless. We’ll try and make up for it with our “H” words next week.

In this episode we’re going to compare the benefits of real estate investing to benefits from other business opportunities such as stock investing, multi-level marketing and franchising. Each of these opportunities can be profitable, but real estate investing offers some unique opportunities to not only make a lot of money and provide for a secure future, but to also design your lifestyle the way you want it to be. This podcast should go a long way towards motivating you to achieve real estate investing success.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……F!

The words for this week are: FHA, foreclosed property, Fannie Mae, first mortgage, fix and flip strategy, and financing. Commit these words to your real estate investing brain. You’ll more than likely come across them at some point during your investing career.

FHA stands for the Federal Housing Administration. This federal agency is designed to be the grantor of primarily residential mortgages. Their guidelines are less strict and favor first time home buyers. They also cater to people who don’t have strong credit and cannot make large down payments. There are limits to the loan amount that the FHA may grant. They are not meant to service the general population, but may help individuals trying to buy their first home to live in. At some point that home may become a rental property for you!

A foreclosed property is a property that has been seized by the bank for lack of payment. Now the bank is the owner of the property and holds all rights to that property. These properties may be of special importance to real estate investors. The banks are not in the business of holding properties. Therefore the banks may be willing to sell the property for a discount to a prospective buyer.

Fannie Mae stands for Federal National Mortgage Association. It is one of many government sources of real estate financing that is available. Their primary goal is to sell FHA and VA mortgages on the secondary market.

Your first mortgage is a lien that is secured by the property and would be in the first position on that property. A mortgage in the first position is the primary mortgage on the property. Sometimes people need more than one loan to secure a property. With this mortgage being in the first position, if the property is ever sold, the first mortgage will be paid off before any other liens against the property are paid.

A fix and flip strategy is the process of planning the rehab of a property from the time of purchasing to the time the property is sold. From the purchase to the settlement date you would plan the different stages of your project as it relates to time and money. The idea is to plan all the activities required such that you can rehab and sell the property quickly for a profit.

Financing is a term used to describe how a debt is paid. Generally it refers to the mortgage on your property. Your financing on a property is simply the loan or mortgage you have on that property. Your ability to secure financing depends on several items such as your debt to income ratio and your credit history.

This episode of the Real Estate Guide 2 Success Podcast focuses on how a solid real estate investing business can not only provide the financial freedom many people desire, but can also get you through tough economic times. The current recession has had a huge impact on people across the world. Unemployment is high and jobs are tough to come by. Not too long ago, I wrote a blog post entitled What Sparked Your Interest In Real Estate Investing?. The post was based on responses from a poll we had here on this site. Financial security was one of the poll answers that many people selected. This podcast describes how I built that financial security for my family, by building a sound business focused on real estate investing.

Welcome to our real estate investing video series. Today’s “Quick Tip” provides a handy checklist for any real estate investor to use when considering a property for purchase. I’ve compiled this checklist based on all the property buying experiences I’ve had over the years. These are the items that MUST be examined before you decide to buy.