5 Acronyms for the Beginner Real Estate Investor
New to the world of real estate investing? We know that for first-time real estate investors, there’s a lot to learn about this industry and it can get overwhelming. But you don’t have to worry because we have been there before and are happy to be your guide through this new journey.
One of the most daunting things in real estate, or in any industry really, are all the acronyms. Have you calculated the LTV of the REI based on the ARV? WHAT??? We know, it may seem confusing, but once you learn what they mean, you’ll be speaking the real estate investor lingo in no time.
Here’s a quick guide to some of the most used real estate acronyms in real estate investing:
The United States Department of Housing and Urban Development, commonly referred to as “HUD”, provides a standardized form known as the HUD-1 which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for purchasing or refinancing real estate.
The American Land Title Association is the national trade association representing nearly 5,500 title insurance companies, title and settlement agents, independent abstracters, title searchers and real estate attorneys. ALTA offers a statement, commonly referred to as the ‘ALTA Statement’, was created to be used in conjunction with the HUD-1 statement, not replace it. They are intended to provide uniformity within the real estate marketplace. Think of the ALTA statement as a receipt for the transaction or as a balance sheet of all the transaction costs and credits.
After Repair Value, or After Renovation Value, is the value of the home after all the repairs have been completed. It is important to calculate the anticipated ARV before purchasing an investment property because often times the amount put in towards the repairs and renovations does not translate to the overall value of the property.
Loan-to-cost is a metric used in commercial real estate construction used to compare the financing of a project as offered by a loan to the cost of building the project. Knowing the loan-to-cost ratio allows lenders to determine the risk of offering a construction loan.
Loan-to-value is a lending risk assessment ratio that lenders examine before approving a mortgage. It is calculated by dividing the mortgage amount by the appraised value of the property. LTVs are critical to mortgage underwriting. Lenders assess the LTV to help determine the level of risk. Generally a higher LTV ratio is, the higher risk the loan is.
There are a ton more acronyms that we didn't cover, but we are happy to answer any questions you may have! Feel free to leave a comment below and someone from our team will get back to you!