Real estate investing glossary

Plain-language definitions for ARV, MAO, BRRRR, hard money loans, and every other term you'll encounter when flipping properties.

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70% Rule: A quick underwriting guideline: pay no more than 70% of ARV minus rehab costs. Ensures sufficient margin for all costs and profit.

ARV (After Repair Value): The estimated market value of a property after all planned renovations are completed. The foundational number in flip deal analysis.

BRRRR: Buy, Rehab, Rent, Refinance, Repeat — a strategy for recycling capital across multiple rental properties using cash-out refinancing.

Cap Rate (Capitalization Rate): Annual net operating income ÷ property value. Used to compare income-producing properties independent of financing.
Cash-on-Cash Return: Annual pre-tax cash flow ÷ total cash invested. Measures the actual yield on your out-of-pocket investment.
Comps (Comparable Sales): Recently sold properties similar to your subject property, used to determine ARV. Look for same area, similar size/beds/baths, sold within 90 days.
Closing Costs: Expenses incurred when buying or selling a property: title, escrow, agent commissions, transfer taxes, recording fees. Typically 2–4% on buy, 7–10% on sell.

DSCR Loan: Debt Service Coverage Ratio loan. A type of rental property financing based on the property's income rather than the borrower's personal income. Common in BRRRR refinances.
Due Diligence: The investigation period before closing: inspections, title search, zoning review, survey. Critical on land deals where issues may not be visible.

Earnest Money Deposit (EMD): A deposit paid by a buyer to show good faith when entering a contract. Typically 1–3% of the purchase price. At risk if the buyer backs out without a valid contingency.

Hard Money Loan: A short-term, asset-based loan secured by real property. Used by flippers for fast closing. Typical terms: 10–14% interest, 2–3 origination points, 6–18 month term.
Holding Costs: Ongoing expenses while you own a property: property taxes, insurance, utilities, HOA fees, and any loan interest. A key variable in flip profitability.

Infinite Return: In BRRRR investing, when the refinance proceeds equal or exceed your total invested capital, leaving zero of your own money in the deal — making your cash-on-cash return mathematically infinite.

LTV (Loan-to-Value): The loan amount as a percentage of property value. A 75% LTV refinance on a $200,000 property = a $150,000 loan. Common BRRRR refinance LTVs: 70–80%.

MAO (Maximum Allowable Offer): The highest price you should pay for a property to achieve your target profit. Standard formula: ARV × 70% − Rehab Costs.

Net Operating Income (NOI): Gross rental income minus operating expenses (excluding debt service). Used to calculate cap rate and DSCR.

Points: Upfront fees charged by lenders, expressed as a percentage of the loan amount. 2 points on a $150,000 loan = $3,000.

Rehab Budget: The total planned cost of renovations, including materials, labor, permits, and a contingency (typically 10–20% of the base estimate).
ROI (Return on Investment): Net profit ÷ total invested capital. On a flip: (Sale price − all costs) ÷ all costs. A 20% ROI on a 6-month flip = ~40% annualized.

Wholesale Assignment: Transferring your rights in a purchase contract to a third-party buyer for an assignment fee, without ever taking title to the property.