Terms for: F
A loan that is fully repaid at maturity by periodic (monthly) reductions of the principal. The first part of each monthly payment covers interest on the outstanding debt as of the payment due date and the remainder of the payment goes to reduce the outstanding debt.
An agreement between a permanent lender and an interim (typically construction) lender wherein the permanent lender issues a conditional commitment that will replace the construction loan once a given set of terms and conditions have been achieved.
Expenditures such as property taxes, license fees, and property insurance that are not directly affected, by the occupancy of the property. Fixed expenses along with operating expenses are subtracted from effective gross income to determine the net operating income of property.
A lien on property in which the lender’s claims are superior to the rights of subsequent lenders. Certain lenders only make first mortgages due to regulatory requirements; others limit mortgages to these senior instruments due to company policy.
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.
Commonly known as “Fannie Mae”, the FNMA is the largest buyer of existing mortgages. The Federal National Mortgage Association was originally organized by the federal government in 1938 to purchase FHA-insured mortgages. The association was reorganized in 1968 as a quasi-private corporation whose entire ownership is private. Fannie Mae raises capital by issuing corporate stock which is actively traded on the New York Stock Exchange and by selling mortgages out of its portfolio to various investors.
An economic concept designating the price at which a willing seller and willing buyer will agree when both parties are acting prudently, knowledgeably, and under no compulsion to sell or buy.
Includes the costs of food and alcoholic and non-alcoholic beverages sold, together with the salaries, wages, and employee benefits for managers, kitchen personnel, servers, bartenders, cashiers, and hosts. Other applicable expenses include laundry, linen, china, glassware, silverware, operating supplies, audio/visual equipment, music, and entertainment.
Revenue from the sale of food and alcoholic and non-alcoholic beverages in restaurants, lounges, room service, mini-bar, and banquet rooms. Also includes revenue from public room rentals, service charges, and the rental of audio/visual and other meeting room equipment.
Terms for: G
A lease of a commercial property whereby the landlord (lessor) is responsible for paying all property expenses, such as taxes, insurance, utilities, and repairs.
Terms for: H
The purchase or sale of mortgage future contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.
Terms for: I
The true annual rate of earnings on an investment. Equates the value of cash invested with cash returns. Considers the application of compound interest factors. Requires a trial-and-error method for solution.
Applied to easements, meaning the right to go in and out over a piece of property but not the right to park on it.
A published interest rate, such as prime rate, LIBOR, T-Bill rate or the 11th District COF. Lenders use indexes to establish interest rates charged o mortgages or to compare investment returns.
A loan, including a construction loan, used when the property owner is unable or unwilling to arrange permanent financing. Generally arranged for less than 3 years, used to gain time for operations and or market conditions to improve.
A method of appraising property based on the property’s anticipated future income. Once the net income is established, it is then divided by the estimated capitalization rate to arrive at a fair market value.
Includes premiums paid for insuring buildings and contents, liability, fidelity, and theft coverage. Premiums for workers’ compensation insurance are not included in this category.
Terms for: J
An agreement by two or more individuals or entities to engage in a single project or undertaking. Joint ventures are used in real estate development as a means of raising capital and spreading risk. For all practical purposes a joint venture is similar to a general partnership. However, once the purpose of the joint venture has been accomplished, the entity ceases to exist.
Terms for: K
A small kitchen or part of another room equipped for use as a kitchen. A room with a kitchenette may include a cooktop/burner, refrigerator, sink. In some cases a kitchenette may even include toaster, microwave, and a small array of dishes and utensils. Kitchenettes are a valuable feature in extended stay properties.
Terms for: L
The rate promised by a lender at the time of loan application or commitment. On income property loans, a lock-in generally requires a commitment fee or rate lock fee from the loan applicant.
Rental income is delivered to a trustee (or servicer), who then pays expenses and makes the loan payment, before excess cash is released to the borrower. The lock-box removes borrower discretion and control over funds.
The amount of money borrowed compared to the cost or value (appraised or sale price) of the real property purchased.
A charge required by a lender or loan originator to be paid by the borrower to cover the credit report, property appraisal and other incidental expenses associated with underwriting the loan. The fee is generally not refundable.
Arrangement in which there is at least one partner whose liability extends beyond monetary investment and at least one partner who is passive and limits liability to the amount invested.
The rate that international banks dealing in Eurodollars charge each other for large loans. Some domestic banks and other lenders use this rate as an index for adjustable rate mortgages. The LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from five major banks. Bank of America, Barclays, Bank of Tokyo, Deutsche Bank and Swiss Bank.
The acquisition of a company, financed primarily with borrowed money, using the acquired company’s assets to collateralize the loan.
An arrangement, with specified conditions, whereby a bank agrees to substitute its credit for a customer’s.
An individual or other entity – one who rents property to another under a lease. A landlord.
An individual or entity to whom property is rented under a lease. A tenant.
A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.
The annual cost related to the leasing and releasing of commercial office and retail space. The amount deducted from the Net Operating Income prior to determining the net cash flow available for debt service coverage.
A detailed recap of office and retail leases including tenant name, suite #, square footage, current rental rate including increases, lease start date, term, CAM requirements, extension options and rates.
A loan made for the purpose of purchasing land only not improvements on or to the land. Also called an “acquisition loan.”