Glossary

US Nonresident Alien Income Tax Return — the federal return a non-resident files to report US-source income, including net rental income from US real estate once the property is treated as effectively connected.

A free, unique nine-digit identifier issued by Dun & Bradstreet that anchors your business credit file and is required by many vendors and government agencies.

Employer Identification Number — the federal tax ID issued by the IRS that identifies your business for tax and banking purposes, obtainable without an SSN.

Foreign Investment in Real Property Tax Act — the law that makes a buyer withhold a percentage of the sales price (typically 15%) when a foreign person sells US real estate, as a prepayment of the seller's US tax.

How complete, consistent, and legitimate your business looks to lenders and credit bureaus — matching entity details, real address, phone listing, and licenses determine whether you get approved.

Individual Taxpayer Identification Number — a personal tax ID issued by the IRS for individuals who are not eligible for a Social Security Number, used to file US tax returns and build credit.

A vendor account that invoices you for goods or services and gives 30 days to pay — when the vendor reports payment history, these accounts become the building blocks of business credit.

The person or company designated to receive official legal mail and service of process on behalf of your LLC or corporation in its formation state — required by law.

A smaller company bought and merged into a larger business you already own — adding customers, capacity, or geography at lower cost and risk than building from scratch or buying a standalone platform.

A buyer's explicit acquisition criteria — industry, size or revenue band, geography, and deal structure — used to filter opportunities fast and to tell your network exactly what you're looking for.

A trusted professional — a CPA, attorney, wealth manager, or banker — positioned to know when a business owner is ready to sell, and who can refer off-market deals before they ever reach a listing.

Earnings Before Interest, Taxes, Depreciation, and Amortization — a standardized profitability metric used to value and compare mid-market and larger businesses.

An informal gauge of how ready a seller is to do a fast or creative deal — Motivation, Urgency, and Distress. The higher the MUD, the more flexible the seller on price and terms.

A due-diligence analysis that verifies a business's reported earnings are real, recurring, and sustainable — separating owner-inflated SDE from what a buyer can actually expect.

The seller's written promises in a purchase agreement about the true state of the business — accurate financials, no undisclosed liabilities, clean title. If a rep turns out false, the buyer has a remedy: indemnity, or offset against a seller note.

An acquisition strategy that buys several small companies in the same industry and combines them into one larger entity — which is worth more per dollar of earnings and far easier to sell to a private-equity buyer.

A transaction where a business sells an owned asset — usually real estate — and simultaneously leases it back, freeing capital for the core operating business or an acquisition.

Seller's Discretionary Earnings — the total financial benefit an owner-operator extracts from a small business, used to value and price small-company acquisitions.

A large lump-sum payment of the remaining principal balance due at the end of a short-term note, common in seller-financed and commercial loans.

An installment sale where the seller keeps legal title while the buyer takes possession and pays over time; title transfers only after the final payment. Also called a land contract or executory contract.

A provision in most mortgage contracts giving the lender the right to demand full repayment if the property is transferred or sold.

A creative-finance purchase that layers two pieces of financing: the seller's existing mortgage taken subject-to (first position) plus a seller-carried note for their equity (second position).

A lease combined with the option — but not the obligation — to buy the property at a set price within a set period. The buyer pays an option fee; part of the rent may credit toward the purchase.

Replacing an existing contract or party with a new one by consent of everyone involved — the old obligation is extinguished, not merely handed off like an assignment.

A written, legally binding promise to repay a debt under specified terms — the core document in any seller-financed transaction.

A lease-option structure where an investor leases a property from the owner with an option to buy, then subleases it to a tenant-buyer at higher terms — profiting on the spread without owning the property.

A purchase structure where the seller acts as the lender, carrying a promissory note instead of requiring a lump-sum bank payoff.

A property acquisition where the buyer takes title while the seller's existing mortgage stays in place — the loan is not paid off or assumed.

A seller-financed junior note that wraps around and includes the existing underlying loan, with the buyer making one payment to the seller who continues paying the first mortgage.

Buy, Rehab, Rent, Refinance, Repeat — a real estate investment strategy that recycles capital through cash-out refinancing to build a portfolio with one initial pool of money.

Capitalization rate — a property's net operating income divided by its market value, used as a quick yield and valuation shorthand in commercial and multifamily real estate.

The annual pre-tax cashflow a rental property generates divided by the total cash invested — the simplest measure of how hard your money is working.

A quick screening ratio — purchase price divided by annual gross rent — that lets investors compare rental properties for income efficiency before running a full cashflow analysis.

A one-time fee a property manager charges to find, screen, and place a new tenant — often 50-100% of one month's rent — making tenant turnover a significant cost.

Money set aside monthly for ongoing repairs and future capital expenses — the line item beginners most often omit, making deals look more profitable than they really are.

A percentage surcharge (often 10-15%) some property managers add on top of repair invoices for coordinating the work — a hidden cost that inflates the true operating expense.

A lease in which one party rents an entire property — often with the right to sublease — commonly used by short-term rental operators and by owners seeking guaranteed rent from an operator.

A property's gross rental income minus operating expenses — the number that cap rate and DSCR are built on, calculated before debt service and capital expenditures.

The recurring monthly charge a property manager collects — typically 8-10% of collected rent — for handling day-to-day operations, tenant communication, and rent collection.

Leasing a property long-term and subleasing it short-term (e.g. Airbnb) or furnished mid-term — profiting from the spread between the fixed rent you pay and the variable income you collect.

The federal Housing Choice Voucher program that subsidizes rent for low-income tenants — the government pays a portion directly to the landlord every month.

Financing used to install solar panels — as a loan secured by the equipment or, with PACE, as a lien repaid through the property tax bill — and a due-diligence trap when buying a home with solar.

The cycle of a tenant moving out and a new one moving in — each turnover triggers leasing fees, vacancy, and make-ready costs, making long tenancies highly valuable.

The percentage of time a rental sits empty — lost income that underwriting must budget for even though nobody sends you a bill for it.

Multifamily and commercial real estate loans backed by Fannie Mae, Freddie Mac, or HUD/FHA — offering long terms, low fixed rates, and non-recourse options for qualifying properties.

A first-lien mortgage that merges a checking/sweep account with a HELOC, so every dollar you deposit automatically offsets the loan balance each day — the US version of an offset mortgage.

The interest-calculation method behind a HELOC: interest is charged on the average of each day's balance across the billing cycle, not on a fixed amortization schedule — which is why parking cash against the line saves interest.

Two ways investors finance past conventional limits — a portfolio loan the lender keeps on its own books and underwrites by its own rules, and a blanket loan that covers multiple properties under one mortgage.

A co-general-partner who shares the sponsor role on a real estate syndication — splitting the capital raise, loan guarantees, asset management duties, and promote economics.

Debt Service Coverage Ratio — a measure of a property's net operating income relative to its debt payments, used to qualify loans based on the asset's income rather than the borrower's.

A home equity line of credit that sits in first position — it replaces your primary mortgage instead of sitting behind it, charging variable interest on the daily balance rather than a fixed amortization schedule.

The opening phase of a HELOC — commonly about 10 years — when you can borrow, repay, and re-borrow, often interest-only. When it ends, the line converts to an amortizing repayment period and the payment jumps.

Borrowing money at a lower rate and deploying it at a higher return to pocket the spread — for example, drawing from a ~7% HELOC to fund a private loan or deal yielding 10–14%.

A partnership where two or more parties combine money, skills, or deal flow on a single project, sharing profits according to a negotiated agreement rather than a fixed security.

A layer of debt that sits between the senior loan and equity in the capital stack — higher interest, often convertible, and used to fill the gap when senior debt alone is not enough.

Re-amortizing a mortgage after a lump-sum principal payment: the lender recalculates a lower monthly payment over the same remaining term at the same interest rate — for a small fee, with no new loan, appraisal, or credit check.

Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment, and the real cost an investor must budget when analyzing a deal.

An equity position that receives its return before common equity holders — filling the gap in the capital stack with seniority over the sponsor and LPs but below all debt.

An individual who lends their own capital against a real estate deal — faster, more flexible, and relationship-based compared to institutional banks.

A retirement account that can invest in real estate, private debt, and business equity — not just stocks, bonds, or mutual funds.

Pooling capital from multiple passive investors (limited partners) under a sponsor (general partner) to acquire a larger real estate asset than any single investor could buy alone.

A required mortgage disclosure showing the total interest you'd pay over the full life of the loan as a percentage of the amount borrowed — often cited to make a mortgage sound like a scam, though it ignores inflation and prepayment.

A debt-paydown method that routes all your income through a line of credit — usually a HELOC — to shrink the average daily balance and pay off a mortgage faster, floating expenses on a credit card in between.

After-Repair Value — the estimated market value of a property once all renovations and repairs are complete, used to size offers and refinancing.

The wholesaler's profit for assigning a purchase contract to an end buyer — the difference between the contracted price with the seller and the price paid by the end buyer.

Maximum Allowable Offer — the highest price a wholesaler or investor should pay for a property given its after-repair value, repair costs, and required profit margin.

Very short-term financing — often same-day to a few days — that funds the buy side of a back-to-back double close, most common in wholesaling and flipping, repaid within days when the property resells.