Plain-English definitions of every term that shows up on an actual underwriting page. ARV, MAO, BRRRR, DSCR, cap rate, CoC, NOI — defined the way operators use them, not the way textbooks write them.
Written by Cam Burke — active operator running 70+ units in Oklahoma City through Tuff Holdings. Every term here is one I use on real deals, not a definition I copy-pasted off Investopedia.
A definition should tell you how to use the term, not just what it means. ARV isn't "the estimated post-renovation market value" — it's the number a bank will refi against, so if you blow it your money stays stuck. DSCR isn't a textbook ratio — it's how an investor with 10+ doors qualifies for the next loan when their personal tax returns get ignored. Each entry below leads with the operator angle, then fills in the math.
ARV is the price you'll be able to sell or refinance at AFTER the rehab is done. Banks underwrite refis to 75% of this number, so it's the single most important input on a BRRRR. Get ARV wrong and your whole deal pencils wrong. Pull comps within a half-mile, same beds/baths, last 90 days — don't take a Zestimate as gospel.
See: BRRRR Calculator
The increase in property value over time. Two types: market appreciation (the whole neighborhood goes up) and forced appreciation (you renovate and add value yourself). Forced appreciation is what BRRRR investors are buying — you're not waiting for the market, you're creating the lift through rehab.
How a mortgage payment splits between principal and interest over the life of the loan. Year one of a 30-year is almost all interest; year 29 is almost all principal. Investors track this because principal paydown is silent equity build — it shows up on your balance sheet even if cash flow looks flat.
A strategy where you buy below retail, rehab to force appreciation, place a tenant, then refinance based on the new ARV to pull most or all of your capital back out. Done right, your money recycles into the next deal instead of getting trapped. Done wrong, you leave cash stuck in a property that doesn't cash flow.
See: BRRRR Calculator
Short-term financing (usually 6–18 months) that "bridges" the gap between buying a property and securing long-term financing. Rates are higher than conventional, but bridge loans close in days, not months. Useful when you need to move fast on a property you plan to refinance or sell within a year.
NOI divided by purchase price, expressed as a percentage. A 7% cap means the property generates 7% of its purchase price in net operating income each year — before debt service. Cap rate compares properties as if they were bought all-cash. It's a market-level metric; cash-on-cash is the leverage-aware one.
Annual pre-tax cash flow divided by total cash invested. If you put $40k into a deal and clear $4k a year in cash flow, that's 10% CoC. This is the metric leverage moves — it's why a 6% cap deal can still produce 15%+ CoC. On a full BRRRR where you got all your money back, CoC technically goes infinite.
See: Rental Calculator
Everything you pay at closing besides the down payment — title insurance, lender fees, recording, transfer tax, prepaid taxes and insurance, escrows. Budget 2–4% of purchase price on investment property. Most spreadsheet underwriters skip this line and it shows up as a surprise on settlement day.
Recently sold properties similar to yours in size, age, location, and condition. Comps are how you (and the appraiser) determine ARV. The tighter your radius, the more recent the sales, and the closer the match, the more reliable your number. Stretching comps to support a higher ARV is the fastest way to blow up a BRRRR.
Big-ticket items with long useful lives — roof, HVAC, water heater, appliances, exterior paint. Different from regular maintenance because CapEx items get capitalized and depreciated, not expensed immediately. Smart underwriting reserves 5–10% of rent for future CapEx so you're not blindsided when the roof goes at year seven.
NOI divided by annual debt service. A DSCR of 1.25 means the property generates 25% more income than it needs to cover the mortgage. Investment-property lenders typically want 1.20–1.25 minimum. DSCR loans qualify the property on its own income — your personal W-2 doesn't matter, which is why operators with 10+ doors use them.
See: Rental Calculator
The cash portion of the purchase price you cover yourself. Conventional investment loans usually require 20–25% down; DSCR loans run 20–25%; hard money is often 10–20% on purchase but funds 100% of rehab. The bigger the down payment, the less leverage — and the lower your CoC.
The inspection-and-investigation period between contract and closing. Inspection, title review, survey, lease audit, walk-through of every unit, contractor bids on rehab scope. Skip due diligence and you find out about the foundation crack the day after closing — when it's yours.
The difference between what a property is worth and what you owe on it. Buy at $150k with a $120k loan, you have $30k of equity day one. Force appreciation through rehab and the value goes to $200k? Now you have $80k of equity — even though you didn't pay down a dollar of the loan. That's the whole BRRRR play.
Buy distressed, renovate, sell at retail. Hold time: 3–9 months typically. Profit comes from the spread between all-in cost and after-repair sale price, minus selling costs (6% agent + closing). Flips are taxed as ordinary income, not capital gains — that's the biggest math difference between flipping and BRRRR.
Government-backed loan with 3.5% down for owner-occupants. Investors use FHA only via house-hacking — buy a 2–4 unit, live in one unit for at least a year, rent the others. After 12 months you can move out and keep the FHA financing in place. It's the cheapest leverage you'll ever get.
Purchase price divided by annual gross rent. A property that costs $200k and rents for $20k/yr has a GRM of 10. Lower is better. GRM is a back-of-napkin screening metric — it ignores expenses entirely, so it's useful for sorting deal flow but never for final underwriting.
Short-term, asset-based financing from private lenders. Rates are 10–14%, points 2–4, terms 6–12 months. Hard money funds the rehab and lets you close in days, but the cost is real — typically $4k–$10k on a 6-month BRRRR. Every calculator that ignores hard money interest is lying to you.
A revolving credit line secured by equity in a property you already own. Draw what you need, pay interest only on the drawn balance, pay it back, draw it again. HELOCs are how a lot of investors fund down payments and rehabs without burning cash reserves — but they're variable-rate, so be aware in a rising-rate environment.
Every dollar you pay each month a property sits before it cash-flows — mortgage interest, taxes, insurance, utilities, lawn care. On a 6-month rehab, holding costs alone can be $4k–$8k. Most rookie underwriters multiply by one month instead of six and blow the deal up.
The annualized rate of return that makes the net present value of all cash flows equal zero. Translation: a single number that combines cash flow, appreciation, principal paydown, and the timing of when you got your money out. IRR is the only metric that compares deals fairly across different hold periods.
A non-QM loan that qualifies the borrower based on the property's cash flow (DSCR) instead of personal income. No tax returns, no W-2s, no debt-to-income ratio review. Higher rates than conventional (usually 1–1.5% premium), but the only path to scale once you've maxed out the 10 conventional Fannie/Freddie loans.
See: Rental Calculator
A deal-by-deal partnership where two or more parties pool capital, credit, or sweat equity for a specific project. JVs avoid the regulatory weight of a fund or syndication — they're usually structured as an LLC formed for the one deal. Common split: money partner gets preferred return + 50/50 above that; operator partner runs the deal.
Loan balance divided by property value. A $150k loan on a $200k property is 75% LTV. Investment-property refis cap at 75% LTV in most markets — which is exactly why "the 75% rule" exists for BRRRR. Below 75% you might pull all your money out. Above 75% you leave cash stuck.
A legal claim against a property used as collateral for a debt. Mortgages are the obvious one. Mechanic's liens from unpaid contractors, tax liens from the county, judgment liens from lawsuits — they all attach to the title and have to be paid off at sale. Title search is how you find them before you close.
The most you can pay for a property and still hit your profit target. Classic flipper formula: MAO = (ARV × 70%) − rehab. The 70% leaves room for closing costs, holding costs, selling costs, and profit. If you can't get under MAO, you walk — every dollar above MAO comes directly out of your profit.
The agent-only database where listed properties live. MLS deals are competitive — every flipper and retail buyer sees them at the same time. The deals investors actually buy are usually off-market, but MLS comps are still where you build your ARV.
Gross rent minus vacancy, management, maintenance reserve, CapEx reserve, taxes, insurance, and operating expenses — but BEFORE debt service. NOI is the property's native earning power independent of how you financed it. Cap rate and DSCR both run off NOI, so getting it right matters.
See: Rental Calculator
A tax provision that lets you sell an investment property and roll all proceeds into a like-kind replacement property without paying capital gains tax — as long as you follow the rules (45-day identification, 180-day close, qualified intermediary holds funds). This is how big portfolios get built without bleeding to taxes each transaction.
The seller acts as the bank — you make monthly payments to them instead of a lender. Used when a property won't qualify for traditional financing, when the seller wants tax-advantaged income, or when you want flexible terms. Below-market interest rates and zero closing costs are common. Land deals and free-and-clear properties are the usual setups.
Properties not listed on the MLS. Direct mail, cold calls, driving for dollars, wholesaler relationships, agent networks — all paths to off-market deals. Less competition, more flexible sellers, but you have to build the pipeline yourself. This is where the margin lives.
The four components of a full mortgage payment. P&I is the loan; T&I gets escrowed monthly and the lender pays them annually. When someone says "the mortgage payment is $1,200," ask if they mean P&I or PITI — the difference is usually $300–$500/mo and it crushes cash flow if you forgot to include taxes and insurance.
Insurance that protects the lender (not you) when you put less than 20% down on a primary residence. Runs 0.5–1.5% of the loan annually, added to your monthly payment. Investment-property loans don't carry PMI because they require 20%+ down anyway.
The company or person who handles tenant placement, rent collection, maintenance dispatch, and evictions. Typical fee structure: 8–10% of collected rent, plus one month's rent for placement. Even if you self-manage early, underwrite every deal with 10% PM expense — that way your numbers still work the day you hire it out.
Replacing an existing loan with a new one — usually after the property has appreciated or you've forced appreciation through rehab. Cash-out refi pulls equity out as a check; rate-and-term refi just lowers your payment. The refi step is what separates BRRRR from buy-and-hold — it's how capital recycles.
See: BRRRR Calculator
Total return divided by total investment. The most generic metric in real estate because nobody agrees on what counts in the numerator (cash flow only? appreciation? principal paydown? tax benefits?). Always ask whoever's quoting an ROI exactly what they included — there is no standard.
The renovation work that takes a property from bought-condition to rentable or sellable condition. Light cosmetic ($5k–$15k), moderate ($15k–$40k), heavy gut ($40k–$100k+). Where most BRRRRs die — not on purchase price, on rehab. Track every line item against budget or watch a $40k rehab become $62k by month four.
A document listing every unit in a multi-family or commercial property — tenant name, monthly rent, lease start, lease end, deposit held. Step one of due diligence on any rental purchase. A rent roll that says $1,200/mo but bank statements show $900 deposits means the seller is selling you projected rent, not actual rent.
A line-item document listing every task in a rehab — materials, labor, and cost. The SOW is what contractors bid against and what you track actuals against. No SOW means no accountability — your contractor will redefine "done" on the fly. Build the SOW before you swing a hammer.
See: Value Add Calculator
Same thing as owner financing — the seller carries the note. Worth flagging separately because the term shows up in both buyer and seller marketing. If a listing says "seller financing available," that's a sign of a motivated seller and an opportunity to negotiate terms that beat any bank.
Airbnb, VRBO, Furnished Finder — anything rented for less than 30 days at a time. STRs generate 2–4× the revenue of long-term rentals in the right markets, but operating expenses are higher (cleaning, supplies, utilities, dynamic pricing software) and regulatory risk is real. Many cities have banned or capped STRs in the last 24 months.
A one-time premium at closing that protects you from title defects — undisclosed liens, missing heirs, forged deeds, boundary disputes. Lender's title insurance protects the bank; owner's title insurance protects you. Always buy the owner's policy on investment property. Cheap insurance against a title issue that can wipe a deal out.
A rental that's already renovated and tenanted when you buy it. Sold at retail, no value-add upside, but truly passive. Turnkey is for capital that wants real estate exposure without operations — it is NOT a BRRRR play and the cash-on-cash will reflect that (usually 6–10% at best).
The percentage of time a unit sits empty over the year — between tenants, during turnover, during repairs. Markets and unit types vary, but 5–8% is a reasonable underwriting assumption in most growth markets. Skipping vacancy in your model is one of the top three reasons new operators underwater on cash flow.
Generic term for the return a property generates — used interchangeably with cap rate, CoC, or total ROI depending on context. When a lender says yield, they usually mean DSCR-adjusted return. When a buyer says yield, they usually mean cash-on-cash. Clarify which one you're talking about before you compare deals.
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