I wanted to take some time and create a little dictionary of terms that new investors hear and might not understand.If your new to real estate investing you might not know what these terms are which are ok but if you stick around the industry to talk to other investors these terms will come up a lot.
* A Quick Disclaimer* – These are my version of what I feel these terms mean… It should be pretty standard but feel free to research these terms on your own as well.
1. Flipping – In my opinion flipping is when you find a property at one price and then find a buyer at a higher price. You then assign or sell your contract to the buyer and make a profit. Also called wholesaling.
2. Rehabbing – Also called fixing and flipping, its when you buy a property and fix it up and either sell for a profit or keep as an investment
3. Assigning A Contract – this is when you take a property you have under contract and assign or sell your interest in the property for a profit. This is common with wholesaling properties
4. Earnest Money – Earnest money or earnest deposit is the money you put down when signing a contract. It can be anything of value there usually is not any set amount you have to use it just depends on what you and the seller find acceptable.
5. Private Money – this is funding or money that you can borrow from private investors. This usually is a friend, family member, or other investors.
Usually the interest is higher than traditional lenders but much lower than hard money lenders. In most cases you do not need to have any credit to work with private lenders. They typically lend on the deal.
6. Hard Money – This a lender that will fund your deals or loan money typically at a high interest rate. Sometimes they require points upfront ( 1 point is typically 1% of the amount borrowed) They usually do not require credit and lend off of the deal.
7. Flipping A Contract – Flipping a contract is also called wholesaling or signing a deal or contract. This is when you take a property you have under contract and assign or sell your interest in the property for a profit. This is common with wholesaling properties
8. Double Closing and Simultaneous Closing – These terms are similar but can sometimes mean slightly different things.
Typically a double closing is when you have a property under contract to buy and you line up and end buyer to buy the property from you for a profit and you close the deal first with your funds and then the title company or closing attorney then sets up the transaction for the end buyer to buy the property from you all within a very short time.
This is more common now due to newer regulations.
Simultaneous closings were much more popular a while back and in some areas you can still do them.
The main difference is with a simultaneous closing the end buyer’s money usually will fund the entire transaction you dont need any of your own funds.
The way it is structured typically is the end buyer would close first and bring in the funds and then you would close the first transaction with the end buyers funds.
Like I mentioned new regulations have stopped this in most areas but in some cases if all parties know what is happening it can be done.
9. Wholesaling – this is a very common term and is also called flipping or selling contracts. This is when you find a property at one price and then find a buyer at a higher price. You then assign or sell your contract to the buyer and make a profit.
10. Lease Option - An agreement that gives a renter the choice to purchase a property during or at the end of the rental period
11. Sub 2 or Subject To -This is a investing strategy that is very common and there is a lot to it but the basic definition is that you are buying a property subject to the owners current loan. You keep the loan in place and just take over ownership of the property.
12. Buy And Hold – this is a common investment strategy and is also called renting or landlording. Its when you buy properties and rent them out for a profit of cashflow or for appreciation purposes.
13. Owner Financing – Typically owner financing is when the owner will sell you a property and will finance it or let you make payments on the property so you don’t have to get a loan.
If you have other suggestions please let me know so I can add them !
To Your Success,
Want more great content like this?
Check out my REI Wealth School
Get instant access right now to 20 modules of training and over 250 training videos for just $1
Seriously, get instant access right now for just $1 =====> Check It Out !