1% rule
A screening shortcut: monthly rent should equal at least 1% of the purchase price plus rehab. A $150,000 all-in property would need roughly $1,500 in monthly rent to pass. Investors use it as a fast first-glance filter to reject obvious losers, not as a buy signal — it ignores taxes, insurance, and financing, so it breaks down in high-cost markets.
50% rule
A rule of thumb estimating that operating expenses — taxes, insurance, maintenance, vacancy, management, and capex — consume roughly 50% of gross rent over time, excluding the mortgage. On $1,400 rent, expect about $700 toward expenses before debt service. Investors use it to sanity-check pro formas that assume unrealistically low costs, though the actual ratio varies widely by property age and location.
70% rule
A flip and BRRRR guideline: pay no more than 70% of the after-repair value minus estimated rehab. On a $200,000 ARV with $30,000 in repairs, the maximum offer is about $110,000. The 30% spread is meant to absorb closing costs, holding costs, and profit. Investors treat it as a starting ceiling, then tighten it in slower or thinner-margin markets.
ARV (after repair value)
The estimated market value of a property once renovations are complete, based on comparable recently sold homes. If similar updated houses nearby sell for $220,000, that is your ARV. It anchors nearly every flip and BRRRR calculation — the 70% rule, maximum offer, and refinance loan amount all key off ARV, so an inflated estimate quietly destroys the entire deal.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat — a strategy for recycling one pool of capital across multiple rentals. You buy undervalued, renovate to force appreciation, rent it, then refinance to pull your original cash back out and roll it into the next deal. Done well, investors build a portfolio with little long-term money left in each property, though tight appraisals and rising rates can trap capital.
Cap rate
Capitalization rate — net operating income divided by purchase price, shown as a percent. A property with $12,000 NOI bought for $150,000 has an 8% cap rate. It measures unleveraged return and lets investors compare deals across markets on equal footing. Higher cap rates usually signal cheaper prices or higher risk; lower ones reflect appreciation-heavy metros where buyers accept thinner current income.
Cash-on-cash return
Annual pre-tax cash flow divided by the total cash you actually invested — down payment, closing costs, and rehab. If a deal throws off $3,600 a year on $40,000 invested, that is a 9% cash-on-cash return. Unlike cap rate, it accounts for financing, so it reflects what leverage does to your real return. It is the number most buy-and-hold investors optimize for.
Cash-out refinance
Replacing an existing mortgage with a larger new loan and taking the difference in cash, tapping built-up equity without selling. On a home worth $200,000 with a $100,000 balance, a 75% loan-to-value cash-out could free roughly $50,000. It is the Refinance step in BRRRR and a core way investors redeploy equity, but it raises the payment and usually requires a seasoning period first.
DSCR (debt service coverage ratio)
A property's rental income divided by its full mortgage payment including taxes, insurance, and HOA. A 1.25 DSCR means rent covers 125% of the payment. It is the metric DSCR lenders actually underwrite: qualification is based on the property's numbers, not your W-2 or tax returns. Most lenders want at least 1.20, though some fund lower at a rate premium.
DTI (debt-to-income)
Your total monthly debt payments divided by gross monthly income — the core qualifier for conventional loans. A borrower paying $3,000 in debts on $8,000 income has a 37.5% DTI. Most conforming lenders cap it near 43–50%. Investors scaling past a few properties often hit this ceiling, which is why many pivot to DSCR loans that ignore personal DTI entirely.
FMR (fair market rent)
HUD's annual estimate of the rent for a modest unit in a metro area, typically set at the 40th percentile of local rents. It is the baseline for Section 8 Housing Choice Voucher subsidies, so it caps what a housing authority will pay by bedroom count. Investors targeting voucher tenants use FMR to gauge the reliable, government-backed rent a property can command.
HAP contract
Housing Assistance Payments contract — the agreement between a landlord and the local housing authority that governs subsidy payments under Section 8. It commits the authority to deposit its share of rent each month, sets the tenant's portion, and binds the owner to program rules. For investors, it means part of the rent arrives reliably from the government rather than depending solely on the tenant.
Hard money
Short-term, asset-based financing from private lenders, secured by the property rather than your credit or income. Rates typically run 9–13% with 1–3 points, often interest-only for 6–18 months. Because it funds fast and can cover rehab, investors use hard money to buy and renovate distressed properties, then refinance into a cheaper long-term loan once the work is done and value is forced up.
HELOC (home equity line of credit)
A revolving credit line secured by the equity in a property you already own, drawn and repaid like a credit card. On a home with $150,000 in equity, a lender might extend a $120,000 line. Investors tap HELOCs to fund down payments, all-cash offers, or rehab, then repay as deals cash out — flexible leverage, though the rate usually floats.
HQS / NSPIRE inspection
The physical inspection a unit must pass before a housing authority will pay Section 8 subsidy. Housing Quality Standards (HQS) is the legacy checklist covering safety, utilities, and habitability; NSPIRE is HUD’s newer standard now replacing it, weighting resident health and safety more heavily. Investors renting to voucher tenants must pass this inspection initially and periodically, so budgeting for repairs keeps subsidy payments flowing.
LTV (loan-to-value)
The loan amount divided by the property's value or price. A $160,000 loan on a $200,000 home is 80% LTV. Lenders use it to gauge risk: lower LTV means more borrower equity and usually better rates. DSCR purchase loans typically cap around 75–80% LTV, while cash-out refinances are tighter, often 70–75%, limiting how much equity you can pull.
MAO (maximum allowable offer)
The highest price you can pay and still hit your target profit, most often derived from the 70% rule: ARV times 0.70 minus rehab. On a $200,000 ARV needing $30,000 in work, the MAO is about $110,000. Investors calculate it before negotiating so they have a hard walk-away number and never let a bidding war erase their margin.
NOI (net operating income)
Annual rental income minus all operating expenses, but before mortgage payments and income taxes. Rent of $18,000 with $6,000 in taxes, insurance, and upkeep yields $12,000 NOI. It isolates a property’s income-producing performance from how it is financed, which is why cap rate and commercial loan sizing both build on it. A higher NOI directly raises value in cap-rate pricing.
Payment standard
The monthly subsidy cap a local housing authority sets for the Section 8 voucher program, usually between 90% and 110% of fair market rent by bedroom size. It determines the maximum the authority will count toward rent; anything above it the tenant pays. Investors check the payment standard, not just FMR, because it is the actual ceiling that decides the rent a voucher can support.
PITIA
Principal, Interest, Taxes, Insurance, and Association dues — the full monthly cost of owning a financed property. It is the complete payment lenders use as the denominator in DSCR, so leaving out taxes or HOA quietly overstates a deal. Investors underwrite to PITIA rather than just principal and interest to avoid buying a 'cash-flowing' rental that actually loses money each month.
Rent reasonableness
A Section 8 requirement that a voucher unit's rent be comparable to similar unassisted rentals nearby — the housing authority will not approve rent above what the open market bears, even when it sits under fair market rent. It stops landlords from overcharging simply because the government is paying. Investors should pull local comps before setting a voucher rent, since an unreasonable ask gets rejected.
SAFMR (small area fair market rent)
Fair market rent calculated by ZIP code instead of across an entire metro. It raises subsidy caps in higher-rent neighborhoods and lowers them in cheaper ones, better matching real local rents. In SAFMR areas, investors can often command higher voucher rents in stronger ZIPs than a metro-wide FMR would allow, making location analysis sharper for Section 8 strategy.
Seasoning
The minimum time you must own a property — or hold a mortgage — before a lender will let you refinance at its new appraised value or pull cash out. Cash-out seasoning commonly runs 6 to 12 months. It matters most in BRRRR: buy too well and you may still have to wait before the refinance frees your capital, so investors plan holding costs around the seasoning window.
Seller financing
An arrangement where the property seller acts as the bank, letting the buyer make payments directly to them instead of getting a traditional mortgage. Terms — rate, down payment, length — are negotiated between the two parties. Investors use it to buy with less cash, weaker credit, or faster closings, and sellers use it to spread out taxes and earn interest, especially on free-and-clear properties.
Subject-to
Buying a property 'subject to' the existing mortgage — you take ownership and make the payments, but the original loan stays in the seller's name. No new financing is originated, so you inherit the seller's rate, which is powerful when their loan sits far below current rates. Investors use it to acquire with little cash, but must weigh the lender's due-on-sale clause risk.
Wraparound mortgage
A form of seller financing where the seller keeps their existing loan and extends the buyer a new, larger loan that 'wraps around' it. The buyer pays the seller, who keeps paying the underlying mortgage and pockets the spread. Investors use wraps to buy or sell with flexible terms and built-in cash flow, though the underlying loan's due-on-sale clause adds risk if the lender calls it.