Common Real Estate Investment and Loan Terminology
When analyzing real estate investments, it is easy to get lost in translation. Here are some of the more common terms and their general definitions.
Raw Land –
Refers to land that has had no development done to it. It is “raw” or undeveloped.
Improved Land –
This is raw land that has had some type of developmental work done to it. In many cases this refers to land that has plumbing, electrical, and foundation work completed. Essentially, the foundation is being laid for the land to be built upon.
Land Development –
This refers to the process to turn the land from raw land into improved or fully developed land. There are different levels of development and when analyzing any property it is important to ask questions about the extent of any development completed on the land.
Bridge Loan –
This is a special type of loan that is lent out by a bank or financial institution to cover an interval of time between transactions. Ex. Buying one house and selling a different house.
Trust Deed –
A short-term loan that is collateralized by a physical piece of property. Trust Deeds are typically written through the services provided by a Trust Deed broker.
Non-Recourse Loan –
This is a type of loan similar to a trust deed in the sense that it is backed by a collateral piece of property. The difference is that the lender cannot hold the borrower personally liable for the loan, however they can seize the property that is held as collateral for the loan in the event of default.
This is the act of determining the value of a particular property. Appraisals take into account market conditions, area property values, and any special improvements made to a property.
Broker Price Opinion (BPO) –
The estimated value of a property as determined by a real estate broker or other qualified individual or firm.