Investor Sub-glossary

Glossary | Broker | Investor | Legal | Mortgage | Owner | Renter

Appreciation is a property’s increase in value.

Assigning is the subletting of rights to another party, and is prohibited by the standard Manhattan residential lease.

Capital gain is realized profit.

A capital improvement increases a property’s value, and includes an assessment for renovations or replacement cost of mechanical equipment; it is deductible from the capital gain for tax purposes; both building assessment and renovation costs are capital improvements.

Collect your own fee takes place when a landlord pays only its broker’s commission; the corresponding, or co-broker, is paid their entire commission by the renter.

A condominium ownership indicates that each unit’s title is privately held, and that the apartment hous’s common areas are co-owned.

A condop combines co-operative-share ownership with a condominium management style, including allowance for subletting and no board of directors’ approval being necessary in order to transfer shares.

Co-ownershipapartment-house types are co-operative, condominium, and condop.

A deductible expense is an investment property’s operating expenses that when subtracted from rental income equals net income.

Economic life is the span during which an investment property is financially beneficial.

Equity is a property’s market value less liabilities—closing costs, the mortgage satisfaction total, and taxes.

Fixed expenses are deducted from gross rental income, including real-estate taxes, building fees, and insurance, to determine gross profit from an investment property.

An income property produces cash flow generated by the collecting of rent.

An interest in real property is the ownership of it.

An investment property’s value is based on both short-term rental income and long-term value appreciation; a condop and condominium’s recent rental and sales history are both considerations.

An investment-worthy property pays a short-term return from current rental income while appreciating in value, known as “upside potential.”

A landlord is the owner of a rental property.

 

A lease is the document outlining the rights and responsibilities between a landlord and a tenant.

 

A lessee is a tenant; a lessor is a landlord.

 

To leverage an investment property is to purchase it with borrowed funds.

 

Margin is the difference between income and expense for an investment property, or the stable, or constant, difference between an adjustable-rate-mortgage index and an interest rate.

 

Net income equals gross income less expenses.

 

Net worth equals assets less liabilities.

 

Owner pays, abbreviated as OP, is an inducement from an owner, management company, or developer to a tenant, offering to pay a portion or all of the commission due a broker.

 

One’s primary residence is the one in which taxes and voter registration are filed.

A property’s profit can be twofold: the short-term gain—rental income less expenses—and the long-term increase in market value following its sale.

A real-estate investment trust, abbreviated as R.E.I.T., is the granting of loans by shareholders, with real property as collateral.

 

Realized gain is net profit; recognized gain is taxable profit.

 

A rent-stabilized lease, abbreviated as R/S, is subject to a state-legislature-set guideline regarding any increase, reviewed annually; such leases are automatically renewable by a tenant; a rent-stable tenant is entitled to increase guidelines on a renewal, as long as the monthly rent remains less than $2,000; it applies only to tenants with declared income of less than $165,000 on at least two of their prior three annual income-tax returns.

 

A rental building has apartments available only for lease—not sale.

 

A rider is an addendum that covers supplemental terms.

 

The right to sublet, or assign, a residential apartment by the primary leaseholder, or tenant, is not permitted in a Manhattan lease.

 

Risk factor is potential loss.

 

A row house is one among homes in an unbroken line, sharing two common walls—as opposed to a detached house without a party wall; although technically correct, the term is lackluster compared with town house and brownstone—and is rarely applied to single-family Manhattan houses.

 

A security deposit, traditionally one month’s rent, is held by a landlord and returned to a tenant upon vacating, following an inspection of the premises for damage.

 

A short-term rental is one that is furnished, with a definite term, or time period, ranging from three months to less than one year.

 

A sole proprietorship is one by a single owner/investor.

 

Subletting is the assigning of a lease to a third party.

 

Tax abatements, or temporary tax credit, are an inducement offered to developers to encourage building activity, which is passed along to purchasers.

 

A town house, abbreviated as TH, is differentiated from a row house as being wider than one standard—25-foot—city lot, and by the extensive custom details to the façade and the sumptuous materials employed throughout the interior.

 

The useful life of an investment property is determined by its covering costs, and its market value’s remaining investment-worthy.

 

Vacancy rate is the empty rental units as a ratio to those let, or under lease.

 

Yield is an investment property’s short-term return.