Cap rate: rate of return generated on a real estate investment property; NOI (net operating income) divided by the property’s purchase price

Carried interest: an incentive compensation structure where the sponsor of a real estate investment receives a portion of the profits if the deal goes well

Crowdfunding: the practice of raising money openly from investors, usually through a web￾based portal

DCR (Debt Coverage Ratio): a measurement of a firm’s available cash flow to pay current debt obligations; property’s net operating income (NOI) divided by the debt service payment

Cash-on-cash return: calculates cash income earned on the cash invested in a property; the annual cash dividend from operations distributed to investors, divided by the initial cash investment in the deal

Fund: an investment vehicle where a sponsor buys, operates, and sells multiples properties on behalf of multiple passive investors

GP (General Partner): the sponsor of a transaction structured as a Limited Partnership

Investment Multiple: a ratio defined as all the money you get out of a deal, divided by your investment in the deal; but are agnostic about how long your money is tied up in a deal

IRR (Internal Rate of Return): estimates the profitability of potential investments; the IRR takes into account all cash flows into or out of an investment, including the initial investment, operational distributions, and proceeds from the sales or refinancing of a property

JV (Joint Venture): a real estate transaction made with one passive investor and one sponsor

LLC (Limited Liability Company): a commonly used type of legal entity created to invest in real estate and shield the underlying investors from some types of liability

LP (Limited Partnership): is defined as having limited partners and a general partner, which has unlimited liability

LP (Limited Partner): a passive investor in a real estate deal, especially refer to investors in a Limited Partnership entity.

LPA (Limited Partnership Agreement): the legal document governing the mechanics of how a specific limited partnership entity will operate

LTV (Loan to Value Ratio): used by lenders and equity investors as a measure of risk and is calculated by the loan amount divided by the value of the property; the higher the leverage used in the transaction, and the riskier the deal

Manager or Managing Member: the sponsor of a transaction structured as a Limited Liability Company

Member: a passive investor in a real estate deal

NOI (Net Operating Income): a measure of the profitability of a property

NPV (Net Present Value): a measure of the risk-adjusted profitability of an investment

Operating Agreement: the legal document governing the mechanics of how a specific limited liability company entity will operate

Operator: a sponsor (someone who puts deals together for passive investor) who also handles day-to-day operations at a property such as on-site management or construction management

PPM (Private Placement Memorandum): a document summarizing everything important about an investment opportunity; a summary of the real estate, plans for operating and improving the property, information about the GP/manager, a description of the economics of the investment, and other key information

Pref (Preferred Return): the investment return rate that passive investors must receive before the sponsor begins to earn carried interest

REIT (Real Estate Investment Trust): a specific type of polled real estate investment vehicle, the most well-known of which are traded publicly on exchange like stocks

Sponsor: a generic term used to describe a GP (General Partner) or a manager in a situation where the type of entity is indeterminate

Subscription Agreement: a form to be completed and returned when you decide to commit to invest in a property or fund

Syndication or Syndicate: a single real estate transaction made with multiple passive investors and one sponsor

Waterfall: a description of how cash distributions from operations or the sale of a property will be made