Understanding is key… Real Estate terms newbie realtors should know and understand…

ROI (Return On Invest): Layman’s terms- How much you’re profiting

 

ARV (After Repair Value): Layman’s terms- How much you have after you pay for renovations

 

FMV (Fair Market Value): Layman’s terms- an estimate on how much a buyer would pay a seller under the best circumstances. Both parties would be un-pressured, willing and knowledgeable about buying and selling.

 

LTV (Loan To Value): Layman’s terms- a term used in mortgages and lending. Tells banks and other lenders how risky your investment is. Higher risk investments have loans with higher interest rates. You may also have to buy mortgage insurance. LTV below 80% usually gets the lowest interest rates.

 

MAPP (Maximum Allowable Purchase Price): Layman’s terms- How much you can buy a property for and still profit. Consider how much you will have to spend on renovations.

 

NOI (Net Operating Income): Layman’s terms- after you take away all necessary operating expenses, the remaining number is how much you profit from property.

 

PITI (Principal, Interest, Taxes & Insurance): Layman’s terms- your mortgage! It encompasses your principal amount, loan interest, property tax, homeowner’s insurance and private mortgage insurance premiums.

 

Responses

  1. Thank you for posting this. There was only one word I was not familiar with. Please continue to break it down like this. I talk to myself like this so its cool to see someone saying it like how we talk to each other naturally. 🙂

  2. Thank you. When doing my property analyses, I applied all of these but didn’t know that I was applying MAPP. Is net operating income for commercial properties or also for 1-4 units?