Glossary -

Accredited Investor

A person who is qualified as a sophisticated investor according to the United States Security Exchange Commission (SEC). In order to qualify, an individual must

1. earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income

Or

2. have a net worth exceeding $1 million, either individually or jointly with his or her spouse.

Or

3. be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.

Back To Top

Agent

An Agent can be one of three things. It can be someone who is:

  • licensed to sell insurance
  • a representative of a issuer or broker who is trying to sell securities
  • a manager of security transactions
Back To Top

Amortization

A set payment timetable to repay a debt, which is relevant primarily with mortgages.

Back To Top

Barter

A synonym for trade. Usually does not involve currency. Can also relate to negotiating prices.

Back To Top

Breakeven

The point at which revenues match expenses

Back To Top

Broker

An organization or individual who manages stock portfolios for a fee/commision or is the equivalent of an agent. Alternatively, it is a liscensed real estate professional who usually represents the seller’s interest

Back To Top

Capital Gains/Losses

A gain (or loss) in the value of an asset that is only realized once the asset is sold. Applies to many forms of investment, including real estate

Back To Top

Capital Lease

A lease that does one of these four things  1. Transfers ownership of the asset in question  2. The duration of the lease is 75% of the assets economic life  3. The lease is worth 90% of the assets economic value  4. The lease has a bargain purchase option

Back To Top

Crowdfunding

A collaborative investment in which many people invest small amounts to reach a large goal. Usually there is some sort of return on said investment, which could be anything from some small bauble or even equity in real estate.

Back To Top

Debt Investment Crowdfunding

In terms of real estate this type of crowdfunding is a group of people essentially providing someone a mortgage. Yield is primarily dependent on interest rates, but can also change as a result of other factors as well.

Back To Top

Diversification

When investing, it is important to not place all of your money in one investment, in case of a botched move. Therefore having a portfolio with a variety of different investments will ensure relative safety. For example, in addition to stocks and bonds, a wise investor might choose to invest in real estate as well. Within real estate alone there is space for diversification. You can have investments in different kinds of debt and also equity.

Back To Top

Equity Investment Crowdfunding

Multiple people investing in the equity of a real estate offering. Earns revenue through rent or capital gains.

Back To Top

Fee Based Investment

A salary for the broker/agent/advisor that is a set percentage of the value of the investment. This creates buy in for the broker/agent/advisor as they will want to ensure that the investment is as profitable as possible. This is in contrast to Commission Based Investment which is dependent on how many moves the broker/agent/advisor decides to make.

Back To Top

First Mortgage

Homes can be expensive, and most people cannot afford to put down the complete purchase price at once. The banks offer loans that are repaid along with interest. The interest is very much depedent on the potential homeowner. The more risky the homeowner seems to banks the higher the interest.  This mortgage is backed by the value of the house.

Back To Top

Global Bond

A bond which can be traded in a domestic or internationally in a European market.

Back To Top

Global Fund

A mutual, closed end or exchange traded fund that can invest anywhere, whether international or domestic.

Back To Top

Globalization

The growth of international and foreign business, which creates an increasingly interconnected world.

Back To Top

Glocalization

The development of global and international trade which focuses on tailoring products to local communities.

Back To Top

Gross Profit Margin

A measurement of percentage of capital from revenue left over after accounting for cost of goods sold. The actual equation is (Revenue-Cost of Goods Sold)/Revenue.

Back To Top

Ground Rent Agreement

A situation that is unique to real estate. An individual owns the building but not the land itself and pays rent. Common to commercial real estate, but less so for home ownership.

Back To Top

Guaranteed Mortgage Certificate

Pool of mortgages backing a bond. Exclusively residential mortgages. Even if the mortgage is paid back quicker (with less interest), the bond owner will still be returned his or her full principal.

Back To Top

Home Affordable Refinance Program

A program offered by the Federal Housing Finance Agency after the housing crisis of 2008. HARP allows homeowners with mortgages valued higher than their home value to refinance.

Back To Top

Home Equity Loan

Otherwise known as a Second Mortgage, which is covered below.

Back To Top

Home Mortgage

Essentially a loan but exclusive to residential real estate, which allows the lender to hold onto the title of the home until principal and interest is paid off. Usually paid in monthly installments.

Back To Top

Housing Economic Recovery Act (HERA)

This formula allows banks to evaluate how much debt to revenue the borrower will incur, before giving out mortgages. The standard is 28%, however depending on credit history as well as if there is a co-borrower, banks can be more flexible.

Back To Top

Income Property

Real estate purchased for the sole purpose of earning revenue.  The property can do so through rent, value appreciation, and leasing. Mortgages for such ‘non owner occupied’ estates tend to come with higher interest rates.

Back To Top

Institutional Brokers Estimate System – IBES

A central system or database that collects predictions of future earnings for the stock market. There is not yet such an offering for real estate.

Back To Top

Institutional Investor

A non bank entity that trades in such large amounts that they receive preferential treatment. This can qualify as lower commissions or interest.  These investors are more trusted as knowledgeable and for that reason are rewarded. In terms of real estate it might be easier for an institutional investor to get a good mortgage on an overseas offering than an investor with smaller resources.

Back To Top

Interchange Rate

A fee charged by banks to their customers for insurance in case of fraud and regular systematic charges.

Back To Top

Interest Only Mortgage

A mortgage that allows the borrower to push off paying principal and only pay for interest. Eventually the principal must be paid off, but there are significantly less time constraints with this kind of mortgage.

Back To Top

Interest Rate Future

Contractually obligating someone to preemptively set an agreed upon price for an interest bearing asset.

Back To Top

Internal Rate of Return

A predictor of earning potential of a certain investment.

Back To Top

International Bank Account Number (IBAN)

A numbering system originally developed in Europe to help keep track of the geographic location of bank accounts.

Back To Top

International Capital Asset Pricing Model

A financial model that helps evaluate international and foreign investment potential. It differs form the Capital Asset Pricing Model because it factors in foreign exchange rates.

Back To Top

International Commerce

Transactions of goods between multiple countries.

Back To Top

International Currency Converter

An online program and function that automatically calculates foreign currency exchange rates.

Back To Top

International Currency Exchange Rate

How much a foreign currency is worth relative to a domestic one.

Back To Top

International Finance

Interactions between two countries which cover financial topics like currency exchange rates, foreign direct investment and international financial management. This is a Macro Economics concept through and through.

Back To Top

Internationalization

Designing a product so that it can be used or accessible on an international stage. For example our platform is offered in different languages, and can be used by users from a variety countries.

Back To Top

Joint Owned Property

Property co-owned by multiple parties at once. This could include a communally owned real estate.

Back To Top

Jumpstart our Business Startups (JOBS) Act

Passed in 2012, it was meant to jumpstart the small business and startup playing field. One particularly relevant way which it did so was by allowing equity based real estate crowdfunding online. This opened the door to a new $1 Bllion market.

Back To Top

Keynesian Economics

An economic theory developed by John Maynard Keynes, which suggests that economic intervention by the government on the demand side of the market can help ease the regular climbs and dips of the economy.

Back To Top

Land Contract

A loan similar to a mortgage. However, it differs because the home is owned by the purchaser/borrower, and the payments are not amortized evenly and could include a large baloon payment on the tail of the contract.

Back To Top

Land Lease Option

Extends the length of a lease, but the lessee usually has to pay a premium to earn it.

Back To Top

Land Trust

An entity maintains ownership of all or part of land or real estate for the benefit of another.

Back To Top

Landominium

A type of real estate offering where an individual owns land and the property on it, but is part of a larger community managed by an individual or organization.

Back To Top

Lease

A renting aggreement in which the borrower agrees to pay monthly for use of another’s property.

Back To Top

Legal Rate of interest

The highest rate of interest that can be charged on any loan. It is mandated by the reigon’s respective government.

Back To Top

Lender Paid Private Mortgage Insurance

Insurance on the mortgage paid by the lender. Often the lender is compensated through a higher interest rate on the mortgage.

Back To Top

Lessee

The property owner, or the one that gives the lease

Back To Top

Lessor

The renter, or the one that pays to receive a lease

Back To Top

Level 1 Assets

Assets that have a clear listed market value or ‘mark to market’ pricing mechanism. For example real estate listed on a realtors website, or a listed stock. The Financial Accounting Standards Board after 2007 required companies to list what level an asset is.

Back To Top

Level 2 Assets

Not listed pricing value but can be evaluated based on other readily avaliable pricing information.

Back To Top

Level 3 Assets

Very challenging to determine pricing value. Generally this level’s market value can only be determined through financial estimations, which are imperfect.

Back To Top

Level Payment Mortgage

A mortgage which charges the lessor a consistent amount every month. This allows for an easily maintained budget.

Back To Top

Leveraged Lease

A lending company either partially or fully finances the loan, and the lessee creates the agreements and payment terms with the borrower. In this kind of lease the lessee is the go between and collects the lessor’s money before passing it on to the lending company.

Back To Top

Lien

The right for a lender to take collateral if someone fails to pay back a loan. Often this is the case in real estate, in which if the borrower is truly incapable of paying back then his property will be taken and auctioned to pay back debt.

Back To Top

Lien Sale

The sale or auction of the item that was under lien, in order to pay back debt.

Back To Top

Line of Credit

The maximum loan balance agreed upon by a borrower and his or her financial institution.

Back To Top

List Price

With regard to real estate this is the initial asking price for the property. It is often determined by comparable properties that have sold recently.

Back To Top

Littoral Land

Land that is next to an ocean.

Back To Top

Long Term Investments

Some sort of property that is recorded on the asset side of the balance sheet and is intended to be held for more than a year.

Back To Top

Mandatory Mortgage Lock

A contractual requirement which makes a seller of a mortgage on a secondary mortgage market have to deliver or pair out of a trade by a certain date.

Back To Top

Marginal Land

Land that is unyielding and cannot produce any sort of profit.  Sells for extraoridinairily cheap.

Back To Top

Mezzanine Debt

A kind of debt investment which has an embeded option for switching to equity.

Back To Top

National Housing Act

Passed in 1934 it created the Federal Housing Agency, which was supposed to make it easier for middle to lower income families to buy houses. Additionally in 1937 it created Fannie Mae, which created the secondary mortgage market.

Back To Top

Net Present Value

Calculates the value of a project at any given time.

Back To Top

Non Operating Asset

A company might have assets which are not needed for the active part of the business, but are still listed on the balance sheet.  These assets might be part of a soon to be sold part of the business or even just investments.

Back To Top

Non Possesory Lien

The lienor does not actually have physical possesion of the property. Instead the lienor will gain revenue when the product is sold. For example, with real estate it is impossible to hold the property a non possesory lien works instead.

Back To Top

Non Traded Reit

A type of REIT which has much higher front end costs, due to the lack of secondary market, but has little taxes or fees. It is highly illiquid.

Back To Top

Open End Mortgage

A mortgage that allows the borrower to add increased value to the mortgage after it has already been in use.

Back To Top

Operating Lease

This lease allows the lessor to use the property without the value constraints of a capital lease.

Back To Top

Peer to Peer Lending

Removes the need for a financial institution as a middle man and allows individuals to lend directly to each other. This allows less deserving borrowers to get mortgages, but usually comes with a higher interest rate.

Back To Top

Peer to Peer Service

A service which makes virtual platforms and marketplaces, where users can connect with each other without an intermediary.

Back To Top

PreForeclosure

The legal buffer time between when the lender delivers a default notice warning the borrower that the debt needs quick action.

Back To Top

Principal Residence

The place or property which individuals designate as their primarily home.

Back To Top

Prior Lien

The first lien that must be paid before any other. An example could be a first mortgage.

Back To Top

Purchase Money Mortgage

A mortgage given by the selller of the land or real estate.

Back To Top

Qualified Mortgage

New rules put into place in 2014 as a response to the housing crisis of 2008. These ensure that lenders have legal restrictions on what terms they can lend on.

Back To Top

Real Estate

Property consisting of land or buildings. Natural structures qualify as well.

Back To Top

Real Estate Agent

Licensed individual who helps people who want to buy or sell real estate. The agents are primarily paid through commission.

Back To Top

Real Estate Crowdfunding

Multiple people investing in the same property and receiving return either through debt or equity offerings.

Back To Top

Real Estate Investment Trust (REIT)

Similar to real estate crowdfunding, except investors have much less choice and visibility of their project options.

Back To Top

Real Estate Limited Partnership

People who provide funding in conjuction with real estate developers and managers. The partners have limited influence in the project, but also limited liability.

Back To Top

Real Estate Mortgage Investment Conduit

A trust of real estate mortgages. These are pooled for uniformity not diversity.

Back To Top

Real Estate Operating Company (REOC)

A company which invests in real estate and who’s shares are publicly traded.

Back To Top

Real Estate Settlement Procedures Act (RESPA)

An act that requires lenders to provide detailed investment information to their borrowers.  Additionally, it restrict lenders and other companies from giving kickbacks to each other.

Back To Top

Real Estate Short Sale

Real estate that sold for less the amount owed on a property. It is an alternative to foreclosure.

Back To Top

Realtor Property Resource (RPR)

Exclusively for National Association of Realtors members, this is a database with large amounts of data and analytics on the housing market.

Back To Top

REIT ETF

ETFs or Exchange Traded Funds that mostly invested in equity REITS.

Back To Top

Riparian Land

Land that is next to an inland body of water.

Back To Top

Second Mortgage

Once an individual has a first mortgage the person can take out a second mortgage. This usually comes with much higher interest rates and is not necessarily spent on real estate .

Back To Top

Secondary Mortgage Market

The marketplace to buy, sell and invest in mortgages

Back To Top

Secondary Mortgage Market Enhancement Act – SMMEA

Passed in the US in 1984, this allowed Federally and State approved companies to invest in and distribute mortgages.

Back To Top

Skip Payment Mortgage

This type of mortgage allows the borrower to skip a payment without a penalty. However, the interest for that payment period is added to the principal, and the principal still needs to be paid.

Back To Top

Subprime Mortgages

Mortgages given to borrowers with poor credit history, often below 600. Usually have much higher interest rates.

Back To Top

Title Loan

The borrower puts down a title to property as collateral, and in turn the loans are processed without credit information being factored in, as well as very fast and with processing fees of only $100

Back To Top

Triple Net Lease

The tenant is responsible for three of the fees his residents would be burdened with in other lease agreements. The lessee is obligated to pay for utilitites, property tax, and building insurance.

Back To Top

Two Step Mortgage

The rates remained fixed for about 5-7 years at which point they adjust to market rates.

Back To Top

Underwater Mortgage

A mortgage that is worth more than the actual value of the house, which means selling the house will automatically incur a loss for the borrower. Alternatively if the borrower cannot pay the house will be forclosed

Back To Top

World Trade Organization

An international organization that manages and tries increasing trade between countries.

Back To Top

Young and Wealthy but Normal

Self made millionares who are trying to live normal and non extravagant lives.

Back To Top