Any real estate investor who has purchased or sold real estate has undoubtedly heard at least one of the following terms and not understood what it meant. It happens.
As part of the ongoing investing tips our real estate investment software blog offers to real estate investors, we offer a brief summary.
- Annual Cap: This sets the annual or even a maximum cap under which the rate of adjustable rate mortgages can adjust upward.
- Blanket Mortgage: This signifies a mortgage that covers more than one property resulting when a real estate investor borrows against a new acquisition and the lender wants to lower the loan-to-ratio and insists on other property added as security.
- Graduated Payment Mortgage (GPM): This mortgage provides payments that start lower and graduate upward over the term of the loan. Real estate investors should understand, however, that this method generally causes the mortgage amount to grow over time because unpaid interest adds to the principal due until the payment is high enough to reverse the trend.
- Installment Sale: This is when a seller holds a purchase money mortgage. Often used by a seller facing a large tax on a gain because the IRS allows the seller to spread the gain over the principal amount received by the seller annually, and not in one lump sum at the point of sale.
- Kicker: Something a party to a contract wants above the terms offered. Lenders may want a percent of income over and above a certain payment; sellers may want to remain on the property for a time rent-free; and so on.
Note: Be sure to check out our real estate investor software before you make any decision to purchase or sell rental income property. Our real estate software enables you to do cash flow, rates of return, and profitability analysis on rental income property in minutes.
