Multifamily Investing Glossary

A tax strategy that allows property owners to deduct a larger portion of the property's value in the earlier years of ownership, resulting in greater tax benefits upfront. Learn more.

Short-term financing used to "bridge" the gap between property acquisition and securing permanent financing, often used in value-add strategies.

The capitalization rate is the ratio of a property's net operating income (NOI) to its market value, expressed as a percentage, serving as a quick way to compare different investment properties. Learn more.

A clause in the partnership agreement that allows the GP to receive a larger share of profits after the LP has received their preferred return, enabling the GP to "catch up" to their agreed-upon profit-sharing percentage. Learn more.

A designation (typically A, B, C, or D) that categorizes multifamily properties based on age, quality, amenities, location, and tenant income levels. Learn more.

An investment opportunity that allows you to invest on the GP’s side while remaining passive. This means you can invest like an LP but earn like a GP. Learn more.

A tax strategy that identifies and reclassifies certain building components to allow for accelerated depreciation, resulting in significant tax savings. Learn more.

A method of raising capital from multiple investors through online platforms, allowing smaller investors to participate in real estate deals with lower minimum investments. Learn more.

A tax deduction that allows property owners to write off the cost of their real estate investment over time, accounting for the theoretical decrease in the property's value due to wear and tear. Learn more.

A metric that shows the total return on investment as a multiple of the original investment (e.g., a 2x equity multiple means doubling your money). Learn more.

A pooled investment vehicle that combines capital from multiple investors to purchase and manage multiple multifamily properties, typically with a specific investment strategy and timeline. Learn more.

The managing partner responsible for executing the business plan, making key decisions, and handling day-to-day operations, while typically holding unlimited liability for the investment. Learn more.

Internal Rate of Return is a metric that measures the annualized return on an investment, taking into account the time value of money and the timing of cash flows. Learn more.

Passive investors who provide capital but have no management responsibilities and limited liability up to their investment amount. Learn more.

The difference between market rents and actual in-place rents, representing potential upside in rental income.

Total revenue minus operating expenses before debt service and capital expenditures.

A minimum return that limited partners must receive before the general partner can participate in profits.

An incentive structure that rewards the GP with a higher percentage of profits after reaching certain return thresholds for the LPs, aligning the interests of both parties.

A company that owns, operates, or finances income-producing real estate and allows individuals to invest in large-scale real estate through publicly traded shares. Learn more.

The primary real estate operator responsible for finding, acquiring, managing, and executing the business plan for a property or portfolio.

A method of pooling capital from multiple investors to purchase real estate that would be too expensive for individual investors, typically structured with a sponsor and passive investors. Learn more.

An investment strategy focused on purchasing properties that need physical improvements or better management to increase income and property value.

A structured distribution model that dictates how profits are shared between GPs and LPs at different return thresholds, typically becoming more favorable to the GP as returns increase. Learn more.

Residential rental properties that are affordable for middle-income workers (typically 60-120% of area median income), often representing Class B or C properties in good locations. Learn more.

A tax deferral strategy that allows investors to sell an investment property and reinvest the proceeds into a like-kind property while deferring capital gains taxes. Learn more.