If you’re new to the world of property management or rentals, you may feel overwhelmed by the industry’s specific terminology. This comprehensive glossary covers all the essential property management and rental terms to help you navigate through the industry with confidence. From lease options and tenant screening to mortgage and NOI, this glossary includes everything you need to know. Whether you’re a landlord, tenant, or property manager, understanding these terms is vital for managing properties and creating successful renting experiences.
Abandonment refers to the voluntary and intentional act of giving up one’s rights, possession, or interest in a real estate property without any intention of reclaiming it or transferring it to someone else. This may involve a piece of land, a residential or commercial building, or a rental unit. Abandonment can occur for various reasons, including financial difficulties, changing personal circumstances, or a lack of interest in maintaining the property.
In the context of rental properties, abandonment occurs when a tenant vacates the premises without providing proper notice to the landlord and without any intention of returning. This often happens when the tenant has left behind personal belongings, stopped paying rent, or has not communicated with the landlord for an extended period. In such cases, the landlord may face challenges in determining whether the tenant has indeed abandoned the property or is simply absent for a temporary period.
Accumulated depreciation represents the sum of depreciation expenses for an asset since its acquisition. It reflects the decrease in the asset’s value over time due to wear and tear, obsolescence, or other factors. In financial statements, accumulated depreciation is subtracted from an asset’s original cost to determine its net book value. This helps businesses track the remaining useful life and value of assets, and it plays a crucial role in tax and financial reporting.
The Americans with Disabilities Act (ADA) is a comprehensive civil rights law enacted in 1990 to protect individuals with disabilities from discrimination in various aspects of life. The ADA aims to ensure equal opportunities and access for people with disabilities in areas such as employment, public accommodations, transportation, telecommunications, and government services. The law requires employers to provide reasonable accommodations for employees with disabilities, mandates accessibility standards for public spaces, and promotes the use of assistive technologies. Overall, the ADA has had a significant impact on improving the quality of life and social inclusion of people with disabilities in the United States.
The process of spreading out regular mortgage payments over the loan’s lifespan by gradually reducing interest payments and increasing principal payments, ultimately repaying the loan principal.
The depreciation of an asset in the most recently completed fiscal year, expressed in monetary terms.
Housing regulated by federal or state agencies with the goal of assisting individuals who meet specific criteria by controlling their rent costs.
These are desirable tangible and intangible features of a property that contribute to its overall value and appeal. Amenities can include aspects such as modern appliances, updated fixtures, swimming pools, gyms, well-maintained outdoor spaces, and convenient access to public transportation or nearby shopping centers. They can also encompass services such as on-site property management, security, or concierge services. Amenities play a crucial role in attracting and retaining tenants, as they can greatly impact residents’ satisfaction and overall living experience.
Amenities not only contribute to the attractiveness of a property but also influence the rental rates and marketability of the property. They can be divided into several categories, including:
- In-unit amenities: Features located within individual rental units that offer convenience or comfort, such as air conditioning, in-unit washer and dryer, dishwasher, high-speed internet, or upgraded kitchens and bathrooms.
- Building or community amenities: Shared facilities and services provided within the property or community, such as a fitness center, swimming pool, clubhouse, business center, or playground.
- Location-based amenities: Proximity to desirable attractions or conveniences, like public transportation, shopping centers, restaurants, parks, schools, or employment centers.
- Security and safety amenities: Measures taken to ensure the safety of residents, like gated communities, surveillance cameras, secure entry systems, or on-site security personnel.
- Eco-friendly or sustainable amenities: Features that promote energy efficiency or environmentally friendly living, such as solar panels, energy-efficient appliances, electric vehicle charging stations, or green spaces.
The availability and quality of amenities can significantly impact a tenant’s decision to rent a particular property, as well as their willingness to pay higher rent for access to these desirable features. Additionally, properties with a wide range of well-maintained amenities can experience lower vacancy rates and higher tenant retention, leading to greater long-term success for landlords and property managers.
A residential unit within a structure designed for housing, often defined as a rented living space, which effectively excludes condominiums and similar residential units.
A real estate professional who facilitates property transactions on behalf of clients while earning a commission. Brokers must possess the necessary licensure and qualifications to practice in their state of residence.
The capitalization rate (CAP rate) represents the anticipated rate of return on a real estate investment property, helping to evaluate the investment’s potential and profitability.
A valuation method that determines the value of a current asset by referencing a recently sold asset with sufficient similarity to indicate the expected sale price.
A building composed of multiple units, each of which can be individually owned by residents. The shared areas and amenities are collectively owned by all occupants within the condominium.
A type of housing that adheres to local housing standards or market rate limitations.
An additional signer on a lease or mortgage who verifies the primary signer’s identity and/or offers extra assurance to the lender or landlord.
A term describing the visual attractiveness of a home as viewed from the street level.
A decrease in value resulting from diminished functionality, economic obsolescence, or physical wear and tear.
A residential structure designed to accommodate two separate individuals or families, such as when one family occupies the upper floor while another resides downstairs.
Equal Housing Opportunity
The opportunity for all American citizens to reside in various housing communities without discrimination based on age, disability, gender, familial status, nationality, race, or sexual orientation.
The difference between a home’s market value and the outstanding amount owed to the mortgage lender. Equity represents the sum a property owner would receive after repaying the mortgage.
An account established by a broker to hold funds related to a real estate transaction until its successful completion or termination. This account ensures that the buyer possesses sufficient funds to finalize the transaction upon approval.
A legal procedure for removing an individual from their current residence, typically due to lease agreement violations or unpaid rent or mortgage.
A formal notice from a landlord outlining a tenant’s breach of lease terms, intended to inform tenants of an impending eviction lawsuit against them.
Fair Housing Act
A federal law designed to prevent discrimination in the housing market based on age, color, disability, familial status, gender, nationality, race, and religion.
Fair Market Value (FMV)
A mutually agreed-upon price that well-informed buyers and sellers reach through negotiations influenced by prevailing market conditions.
An expense that remains constant regardless of rental income but is still included in the property’s operating budget (e.g., property taxes must be paid annually, irrespective of whether the property is occupied by a tenant).
A fixed monthly or annual property management fee expressed in monetary terms.
Homeowners Association (HOA)
HOA is an organization comprising homeowners living in a specific condominium complex, planned community, or subdivision. Its purpose is to establish and enforce guidelines and regulations within the community.
Housing Assistance Payments (HAP) Contracts
HAP contracts enable private landlords to receive rental housing assistance on behalf of low-income households.
Housing and Urban Development (HUD)
The U.S. Department of Housing and Urban Development, whose primary focus is increasing homeownership rates and access to affordable housing.
Government-established income levels used for statistical and decision-making purposes, such as determining tax credit limits.
A percentage of the principal charged by a lender to a borrower for the use of specific assets. In real estate, interest typically refers to mortgage interest rates, which depend on the Federal Reserve Discount interest rate, credit report and score, and lender’s business decisions.
A property purchased by the owner with the intention of generating profit through renting it out to tenants.
A property owner who receives payments from tenants occupying their rental units.
An insurance policy that protects landlords from financial losses associated with their rental properties, such as theft and fire. The policy typically offers a range of optional coverage items, including rent guarantee insurance and legal protection.
A branch of Common Law outlining the rights and responsibilities of both landlords and tenants, including the tenant’s obligation to maintain the premises and the landlord’s duty to deliver possession.
Lead-Based Paint Disclosure
A regulation requiring individuals and families to be informed of the presence of lead-based paint in homes. This regulation took effect in 1996.
A contract specifying the terms and conditions between a landlord and tenant, under which the tenant obtains exclusive rights to use the property for a fixed duration. In exchange, the landlord receives payments for the contract’s duration.
A contract giving the tenant the option to buy the property during or after their tenancy, which prevents the owner from selling to other parties until the lease expires.
The extension of a lease after its initial term ends.
The length of time a tenant has the exclusive right to occupy a property.
A licensed professional who leases real estate properties on behalf of the property owner.
The tenant who rents a property from the landlord.
The landlord who grants the lease to the tenant.
A lease typically lasting more than one year.
Low-Income Tax Credit (LITC) Properties
Properties eligible for tax credits in exchange for leasing to qualified tenants, as determined by the IRS, HUD, and the Justice Department.
Regular activities that keep a property in good condition.
The price at which a real estate transaction occurs, based on the seller’s asking price and the buyer’s willingness to pay.
A debt instrument secured by a property, which the borrower agrees to repay according to specified terms, while the lender has a conditional right to the property as collateral.
Net Operating Income (NOI)
A pre-tax figure representing a property’s revenue minus essential operating expenses, not including amortization, capital expenditures, and depreciation.
A financial plan estimating a property’s income and expenses over a one-year period.
A property management fee calculated as a percentage of the property’s gross collectible income.
Persons With Disabilities Act
Legislation ensuring equal opportunities for people with disabilities, including non-discriminatory access to housing.
A process conducted by landlords or specialized companies to collect information on and validate Assistance Animal requests, detect fraud, and assess potential risks associated with pets.
An initial step in the loan application process determining the maximum loan amount an applicant can receive.
Real estate consisting of land and any permanent structures on it, such as houses or buildings.
A non-invasive visual examination of a building performed by a qualified professional.
Property Management Agreement
A contract outlining the services, responsibilities, and payments agreed upon by a landlord and property management company.
An individual who manages real estate properties on behalf of their owners and handles tasks like accounting, maintenance, and rent collection.
A scheduled event allowing potential tenants to tour a property.
Taxes paid by property owners to local governments, based on the property’s value.
Profit and Loss Statement
An annual financial report showing net profit before taxes.
The proportional allocation and division of expenses based on each party’s share of property ownership or rental.
Land and any attached permanent structures, such as buildings.
Real Estate Agent
A licensed professional who leases and sells real estate properties.
Real Estate Cycle
A cycle reflecting the stages of the real estate market, including recovery, expansion, hyper supply, and recession, which may or may not correspond to broader economic cycles.
- Recovery: This is the initial stage of the cycle, where the market begins to pick up after a period of decline. There is an increase in demand for property, and prices start to rise.
- Expansion: This is the stage where the market is thriving, with high levels of construction and demand for property. Prices continue to rise, and there is a sense of optimism in the industry.
- Hyper Supply: This stage occurs when there is an oversupply of properties on the market, which can lead to a decrease in prices and a slowdown in new construction projects.
- Recession: This stage is characterized by a decline in demand for property, leading to a decrease in prices and a slowdown in new construction. This phase can be triggered by economic factors such as a recession or changes in interest rates.
- Recovery: The cycle then repeats itself, with the market gradually picking up and returning to the recovery stage.
Rent Guarantee Insurance (Rent Default Insurance)
Insurance coverage for landlords in the event a tenant is unable to pay rent due to financial difficulties.
The process of collecting rent from tenants, conducted by landlords or property management companies.
A rent schedule is a written document that outlines the rental rates of a property, usually created by the owner, property manager, or both. The rent schedule may include details such as the amount of rent, the frequency of payments, and the due dates. It can also specify any discounts or penalties for late payments, as well as any other terms and conditions that may apply. The rent schedule is an important tool for landlords and property managers to keep track of rental income and ensure that tenants are aware of their rental obligations. It can be provided to tenants as part of the lease agreement or as a separate document.
A register of rents showing tenant names, amounts due, and total rental income received.
Rent to Own
A lease agreement offering the tenant the option to purchase the property.
A reduction in rent granted by the landlord to the tenant when certain pre-agreed conditions are met, such as an automatic lease renewal.
A policy primarily covering a tenant’s personal belongings and liabilities, with some providers offering more comprehensive coverage.
A property occupied by tenants who pay the owner for the use of the living space and any permanent or temporary fixtures. According to the IRS, a permanent rental property is a house, duplex, or apartment complex occupied by tenants and not used as living quarters for the owner or any dependents listed on their federal tax return forms.
The rental rate is the amount of money tenants are required to pay landlords for occupying a property over a specified time period, typically expressed as a monthly or annual sum. Rental rates can be influenced by various factors, such as the property’s location, size, condition, amenities, and local market conditions.
To determine an appropriate rental rate, landlords often research comparable properties in the area and assess the current supply and demand for rental units. Rental rates may also be subject to negotiation between the landlord and tenant before signing a lease agreement.
Periodic adjustments to rental rates, such as increases due to inflation or local market changes, may be stipulated in the lease terms.
Repairs are the actions taken to fix or restore broken, damaged, or worn-out parts of a property, including fixtures, appliances, and structural elements within the living space. The purpose of repairs is to maintain the property in a safe, functional, and habitable condition. Some common types of repairs in residential properties include:
- Plumbing repairs: Fixing leaking pipes, unclogging drains, repairing or replacing broken faucets, and addressing issues with the water heater.
- Electrical repairs: Resolving issues with wiring, circuit breakers, outlets, switches, and lighting fixtures to ensure the electrical system is safe and functional.
- HVAC repairs: Servicing and repairing heating, ventilation, and air conditioning systems to maintain a comfortable indoor temperature and air quality.
- Appliance repairs: Addressing issues with major household appliances such as refrigerators, stoves, dishwashers, washers, and dryers.
- Structural repairs: Fixing damage to the building’s structure, such as repairing cracks in walls, fixing broken windows, or addressing water damage and leaks in the roof.
- Cosmetic repairs: Improving the property’s appearance by repairing or replacing damaged flooring, repainting walls, or fixing damaged cabinetry.
Landlords are generally responsible for ensuring that the rental property remains in a habitable condition, which includes making necessary repairs. However, tenants may also be responsible for some repairs, particularly if the damage was caused by their negligence or misuse of the property. It’s important for both landlords and tenants to understand their respective responsibilities for repairs and to address issues promptly to maintain a safe and comfortable living environment.
Return on Investment (ROI)
ROI is a metric indicating the profit an investor earns on an investment property as a percentage of the investment cost.
A program allowing private landlords to rent properties at fair market rates to qualified low-income tenants, with rental subsidies funded by the U.S. Department of Housing and Urban Development.
A payment collected from the tenant by the landlord as a reserve for covering any property damage.
Single Family House (SFH)
A single-family house is a standalone residential property designed to accommodate one family or household. It is not connected to any other buildings and is typically situated on its own parcel of land. Single-family homes come in a variety of architectural styles, sizes, and layouts but generally share some common characteristics:
- Privacy: Single-family homes offer more privacy than multi-family dwellings, such as apartments or townhouses, as they do not share walls, floors, or ceilings with neighboring units.
- Outdoor space: Most single-family homes include a yard or garden, providing private outdoor space for activities, gardening, or entertaining.
- Ownership: Single-family homes are typically owned, rather than rented, although rental single-family homes do exist. Ownership comes with more responsibilities, such as maintenance and property taxes, but also offers long-term financial benefits, such as building equity and potential appreciation in value.
- Customization: Homeowners of single-family houses often have more freedom to customize their living spaces, both inside and outside, without the restrictions that may apply in multi-family dwellings or those governed by homeowners’ associations (HOAs).
- Parking: Single-family homes usually have dedicated parking spaces, such as driveways or garages, making parking more accessible and convenient for the residents.
While single-family homes offer several advantages, they may also require more maintenance, time, and financial investment compared to other housing options. Potential buyers should consider factors such as affordability, desired level of privacy, and willingness to handle maintenance responsibilities when deciding whether a single-family home is the right choice for their needs.
The act of a tenant renting a property to a third party for a portion of their lease term.
Government financial assistance provided to a specific group or individual, such as funds for accessing the housing market.
A person who occupies or temporarily possesses land, a building, or a specific unit under an agreement with the landlord for a set period.
A form to be completed by a prospective renter expressing interest in a particular rental property.
Damage occurring during the lease term that is not considered normal wear and tear.
Tenant screening is a crucial step in the rental process, aimed at ensuring that potential tenants are responsible, financially stable, and unlikely to cause problems for the landlord or other tenants. The screening process typically involves several components, such as:
- Credit check: A credit report provides insight into a potential tenant’s financial history, including their credit score, outstanding debts, and payment history. This information helps landlords assess whether the applicant is likely to pay rent on time and can afford the rental costs.
- Employment and income verification: By verifying an applicant’s employment status and income, landlords can determine if the potential tenant has a stable source of income sufficient to cover the rent and other living expenses.
- Rental history: Contacting previous landlords or property managers can provide valuable information about an applicant’s behavior as a tenant, such as whether they paid rent on time, caused any property damage, or had any conflicts with neighbors.
- Criminal background check: A criminal background check reveals any past convictions or criminal activity that may be a cause for concern, helping landlords maintain a safe and secure living environment for all tenants.
- Personal references: Landlords may also ask for personal references from applicants, providing additional insights into their character, reliability, and overall suitability as a tenant.
Tenancy at Suffrage
A situation in which a tenant occupies a property without a lease but with the owner’s permission, such as when a tenant continues to reside in the property after the lease expires and the owner accepts regular rent payments. Also known as tenancy at will.
A type of eviction notice used in some states, requiring payment of overdue rent within three days or vacating the property as the only alternative.
A townhouse, also known as a row house or terraced house, is a residential property that is part of a series of connected houses, typically featuring two or three stories. Each unit shares one or more walls with neighboring units, creating a row of homes that have a similar architectural design and layout. Townhouses often have their own separate entrance and may include a small front and/or backyard.
Townhouses provide a unique blend of the benefits of both single-family homes and apartment-style living. They offer more privacy and space than a traditional apartment or condominium, while still being more affordable and easier to maintain than a detached single-family home. Many townhouses are part of homeowners’ associations (HOAs), which manage shared amenities, such as communal green spaces, playgrounds, or swimming pools, and enforce community rules and regulations.
A turnkey property is a residential real estate investment that is in move-in ready condition and requires little to no additional work or investment by the buyer before it can be rented out. These properties are typically fully furnished, have all necessary appliances, and have undergone any needed repairs or renovations. Turnkey properties are an attractive option for investors who want to start generating rental income immediately without the hassle of managing renovations or repairs.
Turnkey properties can be single-family homes, multi-family units, or even entire apartment complexes. The purchase price of a turnkey property generally reflects the convenience and immediate income potential it offers. Buyers should carefully evaluate the property’s condition, location, and potential rental income to ensure that the investment is sound.
Utilities are essential services provided for the occupants of a property, ensuring a comfortable and functional living or working environment. These services typically include electricity, garbage collection, natural gas or heating oil, sewerage, and water supply. In some cases, other services like telephone, internet, and cable or satellite television may also be considered utilities.
Utilities can be provided by private companies, municipal entities, or a combination of both. Utility costs are typically billed separately from the rent or mortgage payments and can vary based on usage, location, and service providers. In some rental agreements, utilities may be included in the rent or billed directly to the landlord, who then passes on the costs to the tenant as part of the monthly rent or as separate utility charges.
A vacant property refers to a real estate asset, such as a residential or commercial building, that is currently unoccupied and devoid of personal belongings. These properties may be vacant for various reasons, including being in-between tenants, awaiting sale or lease, undergoing renovation, or being a newly constructed building that hasn’t been occupied yet.
Vacant properties can present both opportunities and challenges for property owners, investors, and local communities. On one hand, they can offer potential investment opportunities for buyers looking to purchase and renovate or lease properties in desirable locations. On the other hand, extended periods of vacancy can lead to property deterioration, reduced property values, and potential safety concerns if the property becomes an attractive target for vandalism or criminal activity.
The percentage of unoccupied rental units relative to the total number of rental units in a building, city, or other category.
The vacancy rate is a metric used to quantify the proportion of unoccupied rental units in relation to the total number of rental units within a specific area, such as a building, neighborhood, city, or region. It is generally expressed as a percentage and provides insights into the health of the rental market and the overall demand for rental properties.
A low vacancy rate indicates a strong demand for rental properties, suggesting that the market is competitive and landlords may have more negotiating power when setting rental rates. On the other hand, a high vacancy rate indicates a weaker demand, possibly due to an oversupply of rental units or economic factors that make it difficult for potential tenants to afford the rent. In such situations, landlords may need to lower rents or offer incentives to attract tenants and reduce the number of vacant units.
Vacancy rates can also be used by investors, property managers, and policymakers to make informed decisions about the local rental market. For instance, investors may use vacancy rates to identify potential investment opportunities, while property managers can use this information to adjust marketing strategies and pricing. Policymakers may consider vacancy rates when developing housing policies to address issues such as affordability and the availability of rental properties.
A fully furnished rental property leased to guests for short-term stays (e.g., a two-week vacation).
Vacation rental is a type of rental property that caters to guests seeking short-term accommodations, such as for a holiday or a temporary getaway. These properties are typically fully furnished and equipped with amenities to ensure a comfortable and convenient stay. Vacation rentals can range from cozy apartments and condos to spacious villas and beach houses, catering to various budgets and preferences.
One of the key aspects of vacation rentals is their focus on providing a homely experience, often offering more space and privacy than traditional hotels. They usually feature a kitchen, living areas, and separate bedrooms, allowing guests to cook, relax, and unwind in a home-like setting. This makes them particularly popular among families and larger groups.
Vacation rentals can be managed by individual property owners or through professional property management companies. They are often marketed on specialized online platforms, such as Airbnb, VRBO, and Booking.com, which allow guests to browse and book properties based on their preferences, location, and budget.
A walk-through inspection is a crucial step in the rental process, conducted by the landlord or property manager both during tenant move-in and move-out procedures. This comprehensive assessment involves visually examining the rental property for any damage, missing items, or other issues that may have occurred during the tenant’s occupancy.
The primary purpose of the walk-through inspection is to ensure that the rental property is maintained in a satisfactory condition and to protect both the landlord’s and tenant’s interests. The landlord typically prepares a checklist, documenting the state of the property at the time of the inspection, which includes the condition of the walls, floors, appliances, and other fixtures. Photographs may also be taken to provide visual evidence of the property’s condition.
During the move-in inspection, both the landlord and tenant should review the checklist together, acknowledging any pre-existing damage or issues. This mutual agreement helps avoid potential disputes over security deposit deductions when the tenant moves out.
Upon the tenant’s move-out, another walk-through inspection is conducted to assess any changes in the property’s condition. If any damage beyond normal wear and tear is found, the landlord may use the security deposit to cover repair costs. The comparison between the move-in and move-out checklists helps ensure fairness in determining tenant responsibility for damages and promotes transparency between both parties.
Writ of Restitution
This legal document is issued by a court when a tenant fails to vacate a property after the allotted grace period has passed, following an eviction notice. The writ authorizes a law enforcement officer to forcibly remove the tenant from the premises, ensuring the landlord can regain possession of the property. It serves as the final step in the eviction process, and its enforcement guarantees the protection of the landlord’s rights.