Introduction

At Property Flip Loan, we keep lending clear and practical. This glossary explains common real-estate investing and private-lending terms so you can move from offer to closing with confidence—whether you’re fixing and flipping, executing a BRRRR (rehab-to-rental), bridging to DSCR, or building new.

A

After-Repair Value (ARV)
The estimated market value of a property after the planned renovations are complete. Used to size loans and evaluate deal profitability. Formula: ARV × allowed % (e.g., 65%) = max loan limit guidance.

Amortization
How a loan is paid down over time. Most hard-money loans are interest-only during the term (no amortization), with principal due at maturity.

Appraisal / CMA / BPO
Third-party valuation methods. Appraisal = licensed appraiser report; CMA = agent’s comparative market analysis; BPO = broker price opinion. Lenders may use one or a combination.

Assignment of Rents
A loan document giving the lender rights to collect rents if the borrower defaults.

B

BRRRR
Buy, Rehab, Rent, Refinance, Repeat. Investor strategy to create long-term rentals and recycle capital.

Bridge Loan
Short-term financing to acquire or refinance quickly until a permanent take-out (sale, DSCR refi, conventional, SBA, etc.).

Builder’s Risk Insurance
Policy that covers a property during renovation or construction (materials, theft, certain on-site risks). Often required by lenders.

C

CapEx (Capital Expenditures)
Big-ticket improvements that extend life or value (roof, HVAC, windows). Different from routine repairs.

Carry / Holding Costs
All monthly costs while you own the project: loan interest, taxes, insurance, utilities, lawn/snow, security, etc.

Clear Title
Title free of liens/claims that would prevent transfer. Verified by the title company.

Closing Costs
Fees due at settlement (title, recording, transfer taxes where applicable, lender points/fees, escrows, etc.).

Collateral
The asset securing the loan (typically the property; sometimes additional property via cross-collateralization).

Comps (Comparable Sales/Rentals)
Recent similar properties used to support ARV or market rent.

Contingency (Budget)
Extra line item (often 10–15%) for unknowns uncovered during rehab.

Credit Pull (Soft vs. Hard)
Soft pull doesn’t impact credit score; hard pull may. Many private lenders rely more on the asset and experience than FICO alone.

Cross-Collateralization
Securing a loan with more than one property to lower risk or increase leverage.

D

Debt Service
Your total loan payments (interest and, if applicable, principal) over a period.

Debt Service Coverage Ratio (DSCR)
For rentals: DSCR = Net Operating Income ÷ Annual Debt Service. Lenders often look for ≥1.10–1.25+.

Deed of Trust / Mortgage
Security instrument recorded against the property (varies by state). Gives the lender rights if you default.

Default Interest
Higher interest rate that applies after a default event per the loan docs.

Draw (Construction/Repair Draw)
Partial release of your rehab budget as work is completed. Typically requires inspection/photos and lien waivers.

Draw Schedule
The plan for how rehab funds are released (e.g., demo, framing, MEP rough-in, drywall, finishes, punch list).

Due Diligence
Your homework before closing: scope, comps, permit checks, contractor bids, inspections, title review.

E

Earnest Money Deposit (EMD)
Buyer’s deposit with an offer, credited at closing.

Equity
Property value minus what’s owed. Also refers to your cash into the deal (down payment + closing + rehab before draws).

Exit Strategy
How you’ll pay off the loan: sale, refinance (DSCR/conventional), or other liquidity event. Lenders require clarity here.

Extension
Additional time added to your loan term (often for a fee and subject to lender approval).

F

Fix & Flip Loan
Short-term financing to buy, rehab, and sell quickly. Interest-only, with construction draws, and a defined maturity.

First Position (Lien)
The senior, primary lien recorded against the property. Paid first from sale/refi proceeds.

Floor / Minimum Interest
Some loans have a minimum interest period (e.g., 3 months) even if paid off sooner. Clarify upfront.

G

GC (General Contractor)
Leads the renovation, coordinates subs, manages permits/inspections. Lenders may require license/insurance.

Guarantee (Personal Guaranty)
Borrower/owner’s personal promise to repay in addition to the entity’s obligation.

H

Hard Money Loan
Asset-based financing focused on property value, project, and experience. Fast approvals, flexible underwriting.

Holdback
Funds reserved by the lender (e.g., rehab budget, interest reserve) and released per milestones.

HUD/CD (Settlement Statement)
Itemized list of all costs and credits at closing.

I

Interest-Only (I/O)
Monthly payments cover interest only; principal due at payoff.

Interest Reserve
A portion of the loan set aside at closing to cover interest payments during the project.

Inspection (Draw/Final)
Lender check (virtual or on-site) to verify completed work before releasing a draw.

L

Leverage
Using borrowed funds to increase ROI. Comes with risk; track your downside.

Lien
A claim recorded against a property (mortgage/deed of trust, tax lien, mechanics’ lien).

Loan Estimate / Term Sheet
Non-binding summary of proposed terms prior to closing docs (rate, points, fees, LTC/LTV, maturity).

Loan-to-Cost (LTC)
LTC = Loan Amount ÷ (Purchase Price + Rehab + Closing Costs). Indicates leverage vs. total project cost.

Loan-to-Value (LTV)
LTV = Loan Amount ÷ Current or Appraised “As-Is” Value.

Loan-to-ARV (LTARV)
LTARV = Loan Amount ÷ ARV. Many flip lenders cap around ~65% LTARV (or use the lesser of 65% ARV or 80–85% LTC).

M

Maturity Date
When the loan balance is due in full (balloon).

Mechanic’s Lien
Contractor/sub can record a lien if unpaid. Lenders require lien waivers with draws.

N

Net Operating Income (NOI)
For rentals: NOI = Gross Rents – Operating Expenses (excludes debt service & CapEx). Used for DSCR and valuation.

Non-Owner-Occupied
Investment property not used as the borrower’s primary residence. Most private loans require this.

O

Origination / Points
Upfront lender fee, quoted as a percentage of the loan (e.g., 2 points = 2% of loan amount).

Operating Expenses (Opex)
Recurring costs to run a rental (taxes, insurance, management, maintenance, utilities for common areas, etc.).

P

Per-Diem Interest
Daily interest cost. Useful when pro-rating interest at closing or payoff.

Permit
Local approval for certain work (structural, electrical, plumbing, etc.). Often required for draws.

Prepayment Penalty
Fee for paying off early. Many private loans have no prepay penalty but may have a minimum interest period.

Proof of Funds (POF)
Document showing you have the cash needed for down payment, closing costs, and initial rehab.

Promissory Note
Your promise to repay, stating rate, payment terms, and default provisions.

R

Rehab Budget / Scope of Work (SOW)
Line-item list of repairs with costs and timeline. Drives ARV and draw schedule.

Rehab-to-Rental (BRRRR) Loan
Short-term financing to buy and renovate, then refinance into a rental loan once stabilized with a tenant.

Refinance (Take-Out)
Replacing a short-term loan with longer-term financing (e.g., DSCR 30-year).

Rent Roll
List of units, rents, deposits, lease dates—used for underwriting rentals.

S

Seasoning
How long you’ve owned a property (title seasoning) or how long rental income has been in place. Some refi programs require seasoning (e.g., 3–12 months).

Second Position (Lien)
A junior lien behind the first. Higher risk; fewer lenders allow it.

Seller Credit / Concession
Amount seller agrees to credit toward your closing costs.

Survey
Map showing boundary lines, easements, encroachments—sometimes required by title.

T

Take-Out Loan
The long-term loan that pays off your bridge or rehab loan (sale or refinance).

Term
Length of your short-term loan (commonly 6–12 months). Extensions may be available for a fee.

Title Insurance (Lender’s & Owner’s)
Protects against covered title defects. Lender’s policy is typically required.

T-12
Trailing 12 months of operating statements on a rental property.

U

Underwriting
Lender review of the deal: value, budget, experience, credit/background, reserves, and exit strategy.

UCC-1
A filing to secure a lender’s interest in non-real-estate collateral (e.g., business assets).

V

Vacancy / Economic Vacancy
Physical vacancy is empty units; economic vacancy is lost income from concessions, non-pays, etc.

Value-Add
Improvements that increase income or market value (unit renovations, adding bedrooms/baths, amenity upgrades).

W

Wholesale Deal
Contract assigned from a wholesaler to the end buyer (the investor). Lenders may review assignment docs and final HUD.

Wire Instructions (Verified)
Secure, verified bank details from the title company for sending funds. Always confirm to avoid fraud.

Y

Yield
Total return to a lender from interest and fees. For investors, also used to describe return on cash deployed.

Quick Rules of Thumb (Investor Cheatsheet)

• Max Offer (70% Rule for flips): ~70% × ARV – Rehab – Closing/Holding = Target purchase price.

• LTARV Guardrail: Many private lenders cap around the lesser of ~65% ARV or ~80–85% LTC.

• DSCR Target (rentals): ≥1.20 is a common threshold.

• Rehab Contingency: Budget 10–15% for unknowns.

• Holding Cost Buffer: Plan 6–9 months even if you expect 4–5.

Conclusion

Use this glossary as your deal-making decoder. If you want a quick read on your numbers (ARV, LTC/LTARV, budget, exit), send us your 6-line Deal Snapshot and we’ll help you pressure-test it and outline funding options.