Commercial Multi-Family Terminology
Property Types
• Office Space – Buildings used primarily for administrative or business operations.
• Retail Property – Real estate used for selling goods and services directly to
consumers.
• Industrial Property – Properties used for manufacturing, production, or
warehousing.
• Multifamily Property – Residential buildings with multiple units (e.g., apartments,
duplexes).
• Mixed-Use Development – Combines multiple property uses (e.g., residential,
retail, office) in one building or complex.
• Flex Space – A type of industrial property that can be used for both office and
warehouse purposes.
Investment & Financial Terms
• Capitalization Rate (Cap Rate) – A measure of return on investment; calculated as
Net Operating Income ÷ Property Value.
• Net Operating Income (NOI) – Income from a property after operating expenses,
but before taxes and financing costs.
• Gross Rent Multiplier (GRM) – Property price ÷ gross rental income; used to
estimate value.
• Cash-on-Cash Return – Annual cash flow ÷ total cash invested.
• Internal Rate of Return (IRR) – Annualized return on investment, accounting for
time value of money.
• Equity Multiple – Total cash received ÷ total cash invested; shows total return over
investment period.
• Debt Service Coverage Ratio (DSCR) – NOI ÷ total debt payments; measures
ability to cover debt.
• Operating Expense Ratio (OER) – Operating expenses ÷ effective gross income.
• Triple Net Lease (NNN) – Lease where tenant pays rent plus property taxes,
insurance, and maintenance.
• Gross Lease – Landlord pays all property expenses; tenant pays a fixed rent.
• Modified Gross Lease – A hybrid where tenant and landlord share expenses.
• Expense Reimbursement – When tenants reimburse landlords for property-related
expenses.
Financing & Loans
• Loan-to-Value Ratio (LTV) – Loan amount ÷ appraised property value.
• Amortization – The process of paying off a loan with regular payments over time.
• Balloon Payment – A large final payment due at the end of a loan term.
• Bridge Loan – Short-term financing used until permanent financing is secured.
• Mezzanine Financing – A hybrid of debt and equity financing, typically subordinate
to senior debt.
• Permanent Loan – Long-term loan used to finance stabilized properties.
• Prepayment Penalty – Fee charged if a borrower pays off a loan early.
Leasing & Agreements
• Tenant Improvements (TIs) – Modifications made to a space to suit a tenant’s
needs.
• Common Area Maintenance (CAM) – Fees paid by tenants for upkeep of shared
spaces.
• Escalation Clause – Clause in a lease that allows for periodic increases in rent.
• Lease Term – Duration of the lease agreement.
• Rent Roll – A document listing all tenants, lease terms, and rent amounts.
• Sublease – Agreement where the original tenant leases the space to another party.
• Assignment of Lease – Transfer of lease obligations from one party to another.
Property Management & Operations
• Building Classifications (A, B, C) – Ratings based on quality, location, and
amenities:
o Class A – High-end buildings in prime locations.
o Class B – Mid-level buildings with good condition.
o Class C – Older or less desirable buildings.
• Occupancy Rate – Percentage of rented space in a property.
• Vacancy Rate – Percentage of unoccupied units or square footage.
• Absorption Rate – Rate at which available space is leased in a market.
• Property Management Fee – Fee paid to managers for overseeing operations.
• Deferred Maintenance – Repairs that are delayed or not yet completed.
Valuation & Analysis
• Appraisal – Professional opinion of a property’s market value.
• Comparative Market Analysis (CMA) – Evaluating property value based on
comparable sales.
• Pro Forma – Financial projection showing potential income, expenses, and returns.
• Replacement Cost – Cost to replace a property with one of similar size and utility.
• Market Rent – Rent that a property could command in the open market.
• Effective Rent – Average rent after concessions, like free months, are factored in.
Legal & Regulatory Terms
• Zoning – Government regulations that control land use.
• Easement – Right to use part of someone else's property for a specific purpose.
• Encumbrance – A claim or liability attached to a property (e.g., liens).
• Title – Legal ownership of a property.
• Due Diligence – Investigation period before closing to assess risks and validate
details.
• Environmental Site Assessment (ESA) – Analysis to check for environmental
issues (e.g., contamination).
• Certificate of Occupancy – Legal document certifying a building is safe for use.
Other Key Terms
• Anchor Tenant – Major retailer or tenant that draws customers (e.g., in shopping
centers).
• Build-to-Suit – Property constructed to meet the specifications of a specific tenant.
• Ground Lease – Tenant leases land and may build on it; land is still owned by
landlord.
• Hold Period – Length of time an investor plans to keep a property before selling.
• Exit Strategy – Plan for how an investor will realize a return (e.g., sale, refinance).
• Syndication – Group investment where multiple investors pool funds to buy real
estate.
• 1031 Exchange – IRS provision allowing deferral of capital gains taxes by reinvesting
in similar property.
Commercial Multi-Family Terminology
Property Types
• Office Space – Buildings used primarily for administrative or business operations.
• Retail Property – Real estate used for selling goods and services directly to
consumers.
• Industrial Property – Properties used for manufacturing, production, or
warehousing.
• Multifamily Property – Residential buildings with multiple units (e.g., apartments,
duplexes).
• Mixed-Use Development – Combines multiple property uses (e.g., residential,
retail, office) in one building or complex.
• Flex Space – A type of industrial property that can be used for both office and
warehouse purposes.
Investment & Financial Terms
• Capitalization Rate (Cap Rate) – A measure of return on investment; calculated as
Net Operating Income ÷ Property Value.
• Net Operating Income (NOI) – Income from a property after operating expenses,
but before taxes and financing costs.
• Gross Rent Multiplier (GRM) – Property price ÷ gross rental income; used to
estimate value.
• Cash-on-Cash Return – Annual cash flow ÷ total cash invested.
• Internal Rate of Return (IRR) – Annualized return on investment, accounting for
time value of money.
• Equity Multiple – Total cash received ÷ total cash invested; shows total return over
investment period.
• Debt Service Coverage Ratio (DSCR) – NOI ÷ total debt payments; measures
ability to cover debt.
• Operating Expense Ratio (OER) – Operating expenses ÷ effective gross income.
• Triple Net Lease (NNN) – Lease where tenant pays rent plus property taxes,
insurance, and maintenance.
• Gross Lease – Landlord pays all property expenses; tenant pays a fixed rent.
• Modified Gross Lease – A hybrid where tenant and landlord share expenses.
• Expense Reimbursement – When tenants reimburse landlords for property-related
expenses.
Financing & Loans
• Loan-to-Value Ratio (LTV) – Loan amount ÷ appraised property value.
• Amortization – The process of paying off a loan with regular payments over time.
• Balloon Payment – A large final payment due at the end of a loan term.
• Bridge Loan – Short-term financing used until permanent financing is secured.
• Mezzanine Financing – A hybrid of debt and equity financing, typically subordinate
to senior debt.
• Permanent Loan – Long-term loan used to finance stabilized properties.
• Prepayment Penalty – Fee charged if a borrower pays off a loan early.
Leasing & Agreements
• Tenant Improvements (TIs) – Modifications made to a space to suit a tenant’s
needs.
• Common Area Maintenance (CAM) – Fees paid by tenants for upkeep of shared
spaces.
• Escalation Clause – Clause in a lease that allows for periodic increases in rent.
• Lease Term – Duration of the lease agreement.
• Rent Roll – A document listing all tenants, lease terms, and rent amounts.
• Sublease – Agreement where the original tenant leases the space to another party.
• Assignment of Lease – Transfer of lease obligations from one party to another.
Property Management & Operations
• Building Classifications (A, B, C) – Ratings based on quality, location, and
amenities:
o Class A – High-end buildings in prime locations.
o Class B – Mid-level buildings with good condition.
o Class C – Older or less desirable buildings.
• Occupancy Rate – Percentage of rented space in a property.
• Vacancy Rate – Percentage of unoccupied units or square footage.
• Absorption Rate – Rate at which available space is leased in a market.
• Property Management Fee – Fee paid to managers for overseeing operations.
• Deferred Maintenance – Repairs that are delayed or not yet completed.
Valuation & Analysis
• Appraisal – Professional opinion of a property’s market value.
• Comparative Market Analysis (CMA) – Evaluating property value based on
comparable sales.
• Pro Forma – Financial projection showing potential income, expenses, and returns.
• Replacement Cost – Cost to replace a property with one of similar size and utility.
• Market Rent – Rent that a property could command in the open market.
• Effective Rent – Average rent after concessions, like free months, are factored in.
Legal & Regulatory Terms
• Zoning – Government regulations that control land use.
• Easement – Right to use part of someone else's property for a specific purpose.
• Encumbrance – A claim or liability attached to a property (e.g., liens).
• Title – Legal ownership of a property.
• Due Diligence – Investigation period before closing to assess risks and validate
details.
• Environmental Site Assessment (ESA) – Analysis to check for environmental
issues (e.g., contamination).
• Certificate of Occupancy – Legal document certifying a building is safe for use.
Other Key Terms
• Anchor Tenant – Major retailer or tenant that draws customers (e.g., in shopping
centers).
• Build-to-Suit – Property constructed to meet the specifications of a specific tenant.
• Ground Lease – Tenant leases land and may build on it; land is still owned by
landlord.
• Hold Period – Length of time an investor plans to keep a property before selling.
• Exit Strategy – Plan for how an investor will realize a return (e.g., sale, refinance).
• Syndication – Group investment where multiple investors pool funds to buy real
estate.
• 1031 Exchange – IRS provision allowing deferral of capital gains taxes by reinvesting
in similar property.