Over 80 terms every real estate investor, agent, and broker needs to know \u2014 from cap rate and NOI to NNN leases and 1031 exchanges.
A provision in the IRS tax code (Section 1031) that allows real estate investors to defer capital gains taxes when selling an investment property, provided the proceeds are reinvested in a like-kind property within 180 days. One of the most powerful wealth-building tools available exclusively to real estate investors — not available to agents earning commissions.
SEC Regulation D exemptions that allow real estate syndicators to raise capital from investors without registering with the SEC. 506B allows up to 35 non-accredited investors; 506C allows only accredited investors but permits general solicitation.
The rate at which available properties in a specific market are sold or leased over a given time period. A high absorption rate indicates strong demand.
An individual or entity that meets SEC income or net worth thresholds ($200K+ annual income or $1M+ net worth excluding primary residence) and is eligible to invest in certain private securities offerings.
The process of gradually paying off a loan through scheduled principal and interest payments over a set period. Commercial loans are often amortized over 20-30 years.
A major, well-known retailer or business that occupies a large portion of a commercial property and attracts other tenants and customers to the development.
The increase in a property's value over time due to market conditions, improvements, or inflation. Commercial real estate has historically appreciated at 3-5% annually.
A large lump-sum payment due at the end of a loan term. Many commercial mortgages have 5-10 year terms with balloon payments, requiring refinancing or sale.
The practice of finding undervalued or off-market properties and bringing them to investors in exchange for a fee. A legal way to earn income in real estate without a license in most states.
A short-term loan used to bridge the gap between purchasing a property and securing permanent financing. Typically carries higher interest rates and fees.
A commercial development arrangement where a building is constructed to meet the specific needs of a particular tenant, who typically signs a long-term lease before construction begins.
The ratio of a property's Net Operating Income (NOI) to its purchase price or market value. Formula: Cap Rate = NOI / Property Value. A higher cap rate generally indicates higher risk and higher potential return.
The annual pre-tax cash flow from a property divided by the total cash invested. Measures the actual cash income earned on the cash invested, ignoring leverage effects on appreciation.
Mandatory ongoing education required for licensed real estate agents and brokers to maintain their license. Requirements vary by state, typically 8-45 hours every 1-2 years.
A classification system for commercial real estate quality. Class A properties are newest and highest quality; Class B are older but well-maintained; Class C are older properties needing renovation, often in less desirable locations.
Property used for business purposes, including office buildings, retail centers, industrial facilities, multifamily apartment complexes (5+ units), and special-purpose properties.
Charges paid by tenants to cover the cost of maintaining shared spaces in a commercial property, such as parking lots, lobbies, and landscaping. Common in NNN and gross leases.
Recently sold or leased properties that are similar in size, location, and condition to a subject property, used to determine market value or rental rates.
The ratio of a property's Net Operating Income to its annual debt service (mortgage payments). Lenders typically require a DCR of 1.20-1.35, meaning the property generates 20-35% more income than needed to cover the mortgage.
The IRS-allowed deduction for the wear and tear on a commercial property over time. Residential properties depreciate over 27.5 years; commercial properties over 39 years. A major tax advantage for real estate investors.
Commercial properties leased to dollar store chains (Dollar General, Dollar Tree, Family Dollar) under long-term NNN leases. Known for stable income and investment-grade tenants.
The comprehensive investigation of a property before purchase, including physical inspection, financial review, title search, environmental assessment, and lease analysis.
A deposit made by a buyer to demonstrate serious intent to purchase a property. Typically 1-5% of the purchase price, applied toward the down payment at closing.
The difference between a property's current market value and the outstanding loan balance. Equity builds through appreciation, loan paydown, and property improvements.
A document signed by a tenant confirming the terms of their lease, including rent amount, lease term, and any claims against the landlord. Required by lenders and buyers during due diligence.
Commercial properties leased to quick-service restaurant chains (McDonald's, Chick-fil-A, Starbucks) under long-term NNN leases. Among the most sought-after NNN investments due to brand strength and credit quality.
The highest form of property ownership, giving the owner complete and indefinite ownership of both the land and any structures on it, with the right to sell, lease, or transfer the property.
The legal obligation of a licensed real estate agent or broker to act in the best interest of their client. Includes duties of loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting.
A lease where the landlord pays all operating expenses (taxes, insurance, maintenance) and the tenant pays a fixed rent. Common in office buildings. Opposite of a triple net (NNN) lease.
A quick valuation metric: Purchase Price divided by Annual Gross Rent. Lower GRM indicates better value. Used for initial screening of income properties, not as a substitute for full analysis.
A short-term, asset-based loan from a private lender, secured by the property itself rather than the borrower's creditworthiness. Higher interest rates (8-15%) but faster approval than conventional loans.
Commercial properties used for manufacturing, warehousing, distribution, and research and development. Includes warehouses, flex spaces, and heavy manufacturing facilities. One of the strongest-performing CRE asset classes.
The annualized return on a real estate investment that accounts for all cash flows over the holding period, including purchase, operating income, and sale proceeds. The primary metric for comparing investments.
Real estate purchased with the intent to generate income through rental payments, appreciation, or both. Investors do not need a real estate license to buy, hold, or sell investment properties.
A summary of the key terms of a lease agreement, including tenant name, lease term, rent schedule, renewal options, and tenant improvement allowances. Used during due diligence.
A non-binding document outlining the basic terms of a proposed real estate transaction before a formal purchase contract is drafted. Establishes the framework for negotiation.
The use of borrowed capital (mortgage) to increase the potential return on a real estate investment. A $1M property purchased with $200K down and $800K mortgage uses 4:1 leverage.
The ratio of a loan amount to the appraised value of the property. A $800K loan on a $1M property has an 80% LTV. Lenders typically require 65-80% LTV for commercial properties.
The estimated price a property would sell for in an open market between a willing buyer and seller, both with reasonable knowledge of the facts and neither under pressure to transact.
A lease structure between a gross lease and a NNN lease, where some operating expenses are paid by the landlord and others by the tenant, as negotiated in the lease agreement.
Residential properties with 5 or more units, classified as commercial real estate. Includes apartment complexes, mixed-use buildings, and student housing. Valued based on income, not comparable sales.
A property's gross rental income minus all operating expenses (taxes, insurance, maintenance, management), before debt service. The foundation of commercial real estate valuation. Formula: NOI = Gross Income minus Operating Expenses.
A lease where the tenant pays base rent plus the three 'nets': property taxes, building insurance, and maintenance costs. Provides landlords with predictable, passive income with minimal management responsibility.
The strategy of purchasing commercial properties leased under triple net (NNN) leases to investment-grade tenants. Favored by passive investors for stable income, minimal management, and long-term wealth building.
The percentage of rentable space in a property that is currently leased and occupied. A 95% occupancy rate means 5% of the space is vacant. High occupancy rates indicate strong demand.
A property available for sale that is not publicly listed on the MLS or commercial listing services. Off-market deals are often found through networking, direct mail, and broker relationships.
The costs of running and maintaining a commercial property, including property taxes, insurance, utilities, maintenance, management fees, and reserves. Excludes mortgage payments.
Income earned with minimal ongoing effort, such as rental income from commercial properties. Unlike agent commissions, passive income continues whether or not the investor is actively working.
State-mandated courses required before taking the real estate licensing exam. Requirements range from 40 hours (some states) to 180 hours (others). Does not teach real estate investing.
A financial projection showing a property's expected income, expenses, and returns based on assumptions about occupancy, rent growth, and expenses. Used to evaluate investment potential before purchase.
The operation, control, and oversight of real estate on behalf of the owner. Includes tenant relations, maintenance, rent collection, and financial reporting. NNN leases minimize the need for active property management.
A licensed professional who represents buyers or sellers in real estate transactions and earns a commission on completed sales. Must be affiliated with a licensed broker. Not required to invest in real estate.
A licensed real estate professional who has completed additional education and passed a broker exam, allowing them to operate independently and supervise agents. Brokers earn commissions and may also invest.
A company that owns income-producing real estate and is required to distribute at least 90% of taxable income to shareholders. Allows investors to participate in large commercial real estate portfolios without direct ownership.
A partnership structure where multiple investors pool capital to purchase a commercial property that would be too large or expensive for any single investor. Governed by SEC regulations (506B or 506C offerings).
A document listing all tenants in a property, their lease terms, current rent, and lease expiration dates. The primary document reviewed during commercial property due diligence.
Commercial properties used for selling goods and services to consumers, including strip malls, shopping centers, big-box stores, and single-tenant retail buildings. Includes NNN-leased fast food and dollar store properties.
A transaction where a property owner sells the property to an investor and simultaneously leases it back from the new owner. Allows businesses to unlock capital while retaining use of the property.
A Small Business Administration loan program that provides long-term, fixed-rate financing for commercial real estate and equipment. Allows small business owners to purchase commercial property with as little as 10% down.
An arrangement where the property seller acts as the lender, allowing the buyer to make payments directly to the seller rather than a bank. Can enable deals that conventional financing would not support.
A commercial property leased entirely to one tenant under a net lease structure. Includes NNN properties leased to retailers, restaurants, and service businesses. Prized for simplicity and passive income.
Money provided by the landlord to a tenant to customize or improve leased space. Common in office and retail leases. The amount and scope are negotiated as part of the lease agreement.
Insurance that protects buyers and lenders against losses from defects in the property title, such as undisclosed liens, errors in public records, or competing ownership claims.
See: NNN Lease. A lease where the tenant pays base rent plus property taxes, building insurance, and maintenance costs. The most landlord-favorable lease structure for passive income investors.
The process of evaluating a real estate investment or loan application by analyzing the property's income, expenses, market conditions, and borrower financials to determine risk and appropriate terms.
The percentage of rentable space in a property or market that is currently unoccupied. The inverse of occupancy rate. High vacancy rates indicate weak demand or oversupply.
A commercial property with below-market rents, high vacancy, or deferred maintenance that can be improved through renovations, better management, or lease-up to increase NOI and property value.
The practice of finding distressed properties, putting them under contract at a below-market price, and then assigning the contract to another investor for a fee. Does not require a real estate license in most states.
Local government regulations that dictate how land and buildings in specific areas may be used. Commercial zoning categories include retail, office, industrial, and mixed-use. Zoning affects property value and permitted uses.
Knowing the vocabulary is step one. Jeb Fuller's Masterclass teaches you how to use cap rates, NOI, and NNN leases to build a commercial real estate portfolio \u2014 no license required.
EXPLORE THE COURSES \u2192