Real Estate Investing Terms

What is turnkey real estate?2021-07-23T19:08:33+00:00

Turnkey real estate is a property that is ready to be rented out immediately upon purchase.

What is the difference between Gross & Net Profit?2021-07-23T19:09:58+00:00

Gross Profit means the total amount of money received before expenses.  Net Profit means the total amount of money received after expenses.


$12,000 Rent Received Annually (this is the Gross before you remove expenses)

$6,000 Annual Expenses (including debt service)

$6,000 Annual Net Profit after all expenses are taken out


What is a Cap Rate?2021-07-23T19:10:13+00:00

A cap rate is the rate of return an investment is expected to generate based on the income received.  A higher cap rate is a higher ROI and sometimes that also sometimes means more risk, a lower cap rate is a lower ROI that also sometimes means less risk.  To calculate this number, divide the net operating income (NOI) by the purchase price.


NOI = $6,000 (Net Profit after all expenses are deducted)

Purchase Price = $100,000

Cap Rate = $6,000 / $100,000 = 6%

How do I Become a Private Lender?2021-07-23T19:04:48+00:00

Our family of companies has over $10 Million dollars in private lending capital available and being placed into deals at any given time.  Many of our investors who participate as a private lender are doing so to diversify between their other real estate investments such as turnkey or syndications.  If you’d like to join our team as a private lender, give us a call at (937) 557-8123 to discuss what available investments are in our pipeline and to answer any questions you have.  You can also watch our private lending expert panel video here: https://youtu.be/6OrAq1fJ1Qw

What is Private Money Lending?2021-07-23T19:04:59+00:00

Private Money Lending is when a private individual desires to deploy their capital as a loan on another asset, typically for another investor who buys investment property to flip or hold.  The funding is secured by real estate just like a bank loan and the “note” dictates the interest rate and length of time the note will last before it needs to be paid back, which is referred to as a balloon payment when the note is due.  The benefit of private lending is attractive interest rates secured by real estate with options for short or long term loans.  Many investors get involved in private money loans to diversify their investing portfolio.

What is a 1031 exchange?2021-07-23T19:04:28+00:00

A 1031 exchange is when you can defer your capital gains taxes by selling and acquiring a “like kind” investment property within a certain period of time.

The limited partners (LPs) are the investors the GP rounds up. After contributing their capital, they are silent partners, pretty much, relying on the expertise (and judgment) of the GP. They generally have a hands-off role in the daily operations.

The general partner (GP) can be an individual, but it’s usually an entity, such as a real estate development firm. The GP is usually an experienced real estate manager who acquires or develops properties on the partnership’s behalf. It’s the GP’s responsibility to set up the partnership, secure the financing, and manage the investments. They bear unlimited liability for the partnership’s debts and obligations (like mortgages or loans).

Preferred equity is a type of capital structure that places a private lender in a priority position for repayment from any cash flow or profit earned from a particular investment over others. Preferred equity financing is most commonly used with large real estate investments where additional funds are needed beyond what a senior debt like a bank will or can provide. Rather than borrowing the additional funds from one or a few investors in the form of a loan that holds a second or third lien position, they offer preferred equity positions to equity investors.

Common equity means that investors have one-to-one (or equal) participation in each dollar invested and any potential profits or losses, i.e. no one investor or class of investors receives preference in how their capital is treated. In real estate, after all cash flows or cash proceeds of a property have been returned to debtors and preferred equity holders, the remaining value is distributed equally among Common Equity holders.

A description of the totality of capital invested in a project, including pure debt, hybrid debt, and equity. The stack is described as containing the most risk at the top, traveling down the stack to the position with the least risk. Higher positions in the stack expect higher returns for their capital because of the higher risk. Lenders and equity stakeholders are highly sensitive to their position in the stack.

A preferred return in real estate, sometimes called an investment hurdle or first money out, is a way for capital investors in a deal to get paid first. A preferred return is a way to protect the capital of limited partners in a real estate deal, who often inject the majority of the money into a project.

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