Paramount PMR Blog

Terms All Real Estate Investors Should Know

Paramount Management & Realty - Tuesday, February 23, 2021

real estate investor terms

Are you planning to dip your feet in rental investing? If so, it’s best to begin familiarizing yourself with the rental investing-specific terms that are constantly used. This will help you avoid getting lost in the jargon when having a conversation about investments. It’ll also make related articles easily comprehensible. If you want to be a landlord, this is where to begin!

Here are some of the terms you’ll consistently come across in the world of rental investment:

1. Abandonment

Abandonment means a tenant who leaves the rental without informing the landlord or finishing the tenancy period. 

To illustrate, upon checking the unit, the rental is empty. Some or all of the belongings of the tenant are gone. You also haven’t seen or heard from the renter for weeks. It leads you to conclude that this is a case of abandonment.

2. Amenities

Amenities are features and facilities that are attractive to renters. They make living in an area convenient and enjoyable. Some examples of amenities are parking areas, gyms, good schools, pools and recreation centers.

3. Bond

Bond or rental bond generally means a security deposit. This is a certain amount the landlord requires from the tenants prior to the move-in. The bond will be returned once the tenancy ends. 

Exceptions are made when there are property damages or the tenant has unpaid rent. Other costs like cleaning fees can also affect the security deposit refund.

4. Broker

A real estate broker represents real estate buyers and sellers. Brokers may seem similar to real estate agents. However, they can exercise more independence. They have the prerogative to hire more real estate agents or open a brokerage. 

real estate broker

The brokers’ higher-level training allows them to navigate the technical side of real estate property transactions.

5. Real Estate Agent

A real estate agent is a licensed professional who represents the buyer or the seller in real estate transactions. Agents do their best to negotiate a deal of purchase or sale of a real estate property. They get a percentage of the sale termed as a commission.  

6. Constructive Eviction

Constructive eviction occurs when a landlord wants a tenant to leave the rental. The landlord shuts down utilities or withholds the provision of water and heat to make it hard for a renter to stay. 

Normally, landlords are obliged by the law to make their rental property habitable. In the case of constructive eviction, the landlord fails to properly perform their duty to remove a tenant or force them to vacate the property.

7. Conventional Housing

Conventional housing means a dwelling is reflective of the housing standards in the neighborhood. It also follows the present market prices.

8. Co-signer

A co-signer is another person who puts a signature on a leasing contract or loan. Co-signers are usually required to act as a guarantor of the first signer. They’re also responsible for paying the loan or meeting the conditions of the signed document. If the first signer is unable to pay, the co-signer is liable to pay for the loan. 

Lenders usually require co-signers as an extra level of protection should the first signer default on payment or disappears

9. Eviction

Eviction is a court proceeding where the landlord legally petitions to put an end to a renter’s tenancy in a rental unit. There must be a valid reason for the removal and the due process has to be followed.

evicting a tenant

10. Fair Housing Act

The Fair Housing Act is a law that seeks to end discrimination against race, color, disability, religion, sex, national origin and familial status. Other states have additional sets of protected classes beyond the basic seven.

11. Fixture

Fixtures refer to items that tenants have set up in the rental unit that are hard to detach when the renter moves out. An example would be window air conditioning units, planted shrubs, ceilings fans and built-in bookcases.

Fixtures are commonly affixed to the property and it depends on the agreement if the landlord will pay compensation to the renter upon leaving.

12. Lease

A lease is a formal agreement between the landlord and the tenant that’s typically signed by both. It gives permission to the tenant to reside in the property for an agreed period while providing rent payment to the landlord. It also outlines written conditions, disclosures and policies that both parties must dutifully comply.

13. Lease Option

A lease option is a written offer by a landlord to a tenant to purchase the property they’re currently renting. Once the tenancy ends, the renter has the option to pay for the unit for a certain price to become the property owner.

14. Property Management Agreement

The property management agreement is a formal contract between a property owner and a property management company to manage the property on the owner’s behalf. It contains the management services to be rendered by the company and the charges the owner will pay.

property management agreement

15. Right of Entry

Right of entry is the right to legally enter a property. Landlords are normally restricted to enter the unit without permission from the tenants. They must provide a notice depending on the leasing agreement or state law. 

Landlords are given the right of entry for special cases such as emergencies, property showings or conducting repairs. 

16. Subletting

Subletting is a situation wherein a renter lets another tenant use the rental unit. This commonly happens when the original tenant will not be using the space for a certain period. For example, the tenant will be traveling to another location. Instead of leaving it empty, the tenant sublets the rental to receive a rent payment. 

Some landlords don’t permit this arrangement and they state this condition clearly on the leasing agreement. If the original tenant is allowed to sublet, the obligation to fulfill the conditions in the original signed lease still exists.

17. Tenant

A tenant is a resident of a rental property that’s permitted to stay for a given period of time. The tenant is obliged to pay a specific amount in exchange for the residency. 

Bottom Line

Knowing the terms that come up in day-to-day life as a real estate investor will benefit you greatly in the long run. You'll be fully prepared to deal with any issues that come up in an informed way and avoid potential complications from misunderstandings. 

If you feel like you need more information on any terms or other aspects of property management, please contact Paramount Management & Realty today!

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