Definitions investors actually fight about — especially where a listing, a lender, and a calculator mean three different things. This is not a catalog of made-up product names. For the order to apply them, use the guides.
Cap rate
NOI divided by purchase price (or value). It ignores your loan on purpose. A 5% cap on cheap debt used to look boring; on a 7% mortgage it can mean leverage is a cost. Street listings sometimes quote “cap” on pro forma rent — that is marketing. Use trailing or in-place NOI unless you have a signed lease path to the pro forma.
NOI
Gross potential rent, minus vacancy and credit loss, minus operating expenses. Operating expenses include taxes, insurance, utilities you pay, management, repairs, HOA — not mortgage, not depreciation, not capex if you are doing strict NOI (though underwriting reserves still matter). If someone hands you NOI without a vacancy line, ask for the T-12.
Cash-on-cash
Annual pre-tax cash flow after debt service, divided by cash you actually left in the deal (down payment, closing, initial capex). It moves with leverage and rate. A high cash-on-cash on a 3% interest-only loan is not the same asset as the same house at 7% amortizing.
DSCR (lender)
NOI divided by total annual debt service (P&I plus any required impounds the lender counts). Many investment-property DSCR programs want 1.0–1.25 depending on the shop. The on-site calculators sometimes show rent/P&I as a rough coverage ratio — that is a cousin, not the overlay a credit analyst will run.
GRM
Price divided by annual gross rent, before expenses. Fast filter, easy to game with a fantasy rent. A 12 GRM in a high-tax, high-insurance ZIP can still be a bad buy; an 18 GRM in a high-basis city can be normal. Never use GRM as the last number.
1% rule
Monthly rent at least 1% of price. A 2000s sorting hat. Insurance and taxes have since eaten it in many Sun Belt ZIPs. Keep it as a screen; replace it with NOI before you write an offer. See the underwriting guide.
50% rule
Assume operating costs (ex-debt) eat half of rent. Close-ish on a boring Midwest ranch in a calm insurance year. Optimistic where wind deductibles, reassessments, and HOA dues live. Rebuild the stack from quotes.
PITI
Principal, interest, taxes, insurance. The mortgage calculator’s hero number is PI unless you have added the rest. Escrow shortages are how “the payment” grows after closing without the rate changing.
Vacancy rate
Uncollected rent as a share of gross. Use this street’s days vacant, not a national 5%. A house that leases in 9 days and a fourplex with a chronic C unit are not the same 5%. Turnover paint belongs next to vacancy, not inside a lucky year.
Capex vs repairs
Repairs keep the lights on this year (a disposal, a broken window). Capex is the roof, HVAC, flooring cycles. If your spreadsheet has a fat cash-flow line and a $0 roof reserve on a 1998 roof, you are borrowing from year seven.
LTV
Loan divided by value. Investment conventional is often 75–80% on 1–4 units if you qualify; DSCR and portfolio lenders wander. Higher LTV makes cash-on-cash look juicier until the rate or a vacancy shows up.
ARV
After-repair value — what it should appraise for when the bid work is done. Flip and BRRRR religion. If ARV is a Zillow screenshot plus “the kitchen will be nice,” it is not ARV. Comps have to be renovated sales, not listings.
BRRRR
Buy, rehab, rent, refinance, repeat. The refinance only recycles cash if the appraisal and the DSCR/LTV math cooperate at the new rate. The strategy fails quietly when rehab overruns eat the equity you planned to pull out.
House hacking
Live in one unit (or a room) and rent the rest, often with owner-occupied financing. The cheap rate is the point; treating roommate income as permanent institutional NOI is how people get surprised at refinance.
1031 exchange
IRC section 1031 can defer gain on qualifying like-kind real property held for investment if identification and closing clocks are hit. It is a tax procedure with a qualified intermediary, not a loophole you mention at a barbecue. Read IRS materials and a CPA; this glossary is not that.
Cost segregation / depreciation
Residential rental building basis generally depreciates over 27.5 years. Cost seg tries to reclassify shorter-life components. Bonus rules change. Paper losses are not cash. A tax person who knows rentals beats a blog FAQ.
Subject-to
You take title; the existing loan stays in the seller’s name. Due-on-sale clauses exist. This is not “free financing.” It is a stack of legal and relationship risk that does not belong in a first-deal calculator default.
Seller financing
The seller is the bank. Terms are whatever you both sign — rate, balloon, recourse. Underwrite the balloon as a sale date. If you cannot refi or sell when it comes due, the cute year-one cash flow was rent on a ticking clock.
Hard money
Short-term, asset-based, expensive. Useful for a rehab with a defined exit. Disastrous as a hold loan. Price the points and the default interest, not just the coupon on the term sheet.
Class A/B/C
Slang for asset quality and tenant income band, not a legal rating. Class C cash flow often is a management business. If you will not take a 10 p.m. call, do not buy C because the cap rate is “high.”
STR vs LTR
Short-term (under ~30 days, platform-heavy) versus a conventional lease. STR is a hospitality job plus ordinance risk. Model occupancy honestly; January is not Instagram.
Earnest money
Deposit that shows you will close — or that you read your contingency dates. Size it to local custom, not to machismo. Deadlines on inspection and financing are how EMD becomes a donation.
Due diligence period
Contract window to inspect and walk. Align it with inspector calendars. A weekend on a fourplex is how you buy the sewer. The long 50-item blog checklist belongs here; the twelve-item pre-offer list belongs before you send the offer.
Title insurance
Pays to defend against covered defects in the chain of title. It does not fix a bad location or a bad roof. Read exceptions — easements and survey matters hide there.
Forced vs market appreciation
Forced = you raised NOI or finished work the market pays for. Market = the neighborhood’s multiple moved. Underwrite the first; treat the second as optional dessert.
On-site expense plug (1.5%)
This Site’s calculators often subtract 1.5% of price per year as a blended stand-in for taxes, insurance, and maintenance. It is a screen, labeled as such on the tool pages. Replace it with quotes before you call a number “cash flow.”
Illustrative cash-flow signal
Color labels on some calculators (higher / modest / negative) sort the estimate from your sliders. They are not buy boxes and not live market ratings.