Accredited Investor: An individual or entity that meets certain financial criteria and is allowed to invest in securities not registered with financial authorities. The current requirements to qualify are an annual income of $200,000 for an individual ($300,000 jointly with a spouse) for the last 2 years with the expectation of earning the same or higher; or a net worth exceeding $1 million (not including primary residence), either individually or jointly with a spouse.

Apartment Syndication: Generally, a partnership between general partners and limited partners to purchase and operate an apartment complex, sharing in the risks and returns.

ARR: Annualized Rate of Return is the average annual return on an investment over a period of time, expressed as a percentage of the initial investment.

Capital Expenditures: Expenses incurred to acquire, improve, or maintain a long-term asset, such as roof or parking lot repairs, rebranding and signage, interior and exterior painting, new appliances, new flooring, and updated fixtures.

Capitalization Rate: The rate of return an investor might expect based on the income generated by the property. Cap rate is calculated by dividing the net operating income (NOI) by the market value of the property.

Cash Flow: The amount of money generated by a property after deducting all expenses

Cash-on-Cash: Cash-on-cash (COC) is the ratio of annual before-tax cash flow to the total amount of cash invested.

Debt Service: The amount of money required to pay the principal and interest on a loan.

Debt Service Coverage Ratio: DSCR is the ratio of Net Operating Income (NOI) to the total debt service.

Distributions: Payments made to investors from the profits generated by the property. These may be monthly, quarterly, or annual, as well as at refinance and/or sale of the property.

Economic Vacancy: The percentage of units in a property that are unoccupied or occupied by tenants who are not paying rent.

Effective Gross Income: The total amount of income generated by a property after accounting for vacancy, loss to lease, concessions, bad debt, and non-revenue units.

Equity Investment: The amount of money invested in a property by the purchaser, including the down payment, capital reserves, and closing costs.

Equity Multiplier: The ratio of total net profit (ie. cash flow + sale proceeds) to equity investment.

Exit Strategy: A plan for selling or divesting an investment property.

General Partner: In the context of a multifamily syndication, a general partner (GP) is responsible for actively managing the asset’s operations in execution of the business plan.

Gross Potential Income: The total amount of income that a property could generate in a scenario where all units were rented at market rates, plus all additional income.

Gross Potential Rent: The total amount of rent that a property could generate if all units were rented at market rates.

Interest-Only Payment: A loan payment that only covers the interest portion of the loan, without reducing the principal.

IRR: Internal Rate of Return (IRR) is the rate expressed as a percentage that is used to evaluate the return on an investment over time. Calculating IRR takes into account the amounts invested into the property, cash flow out of the property, and the time at which these occur.

K-1: A Schedule K-1 is a tax document used to report income, gains, losses, deductions, and credits from investments. Losses reported on K-1s may be used to reduce taxable income.

Limited Partner: In the context of multifamily syndications, a limited partner (LP) is a passive investor whose liability is limited to their share of ownership. An LP funds a portion of the equity investment but is not responsible for managing the asset.

Loss to Lease: The difference between the actual rent collected and the potential rent that could be collected if all units were rented at market rates.

Market Rent: The amount of rent that a property could potentially achieve in the current market.

Net Operating Income: The income generated by a property after deducting operating expenses.

Operating Expenses: The costs associated with running a property. Such expenses include utilities, maintenance, and management fees

Passive Income: Income earned from rental properties, limited partnerships, or other enterprises in which a person is not actively involved.

Physical Occupancy Rate: The percentage of units in a property that are occupied.

Preferred Return: A priority return of capital to investors (limited partners) that is distributed before the general partners receive any profit.

Private Placement Memorandum (PPM): A legal document that outlines the terms and risks of an investment opportunity.

Profit and Loss Statement: A financial statement that summarizes the revenues, costs, and expenses incurred during a specific period.

Pro Forma: A financial statement that estimates the future financial performance of a property.

Property and Neighborhood Classes: An ABCD classification system used to categorize properties and neighborhoods based on their quality and desirability.

Refinance: The process of replacing an existing loan with a new loan that has better terms or a lower interest rate.

Rent Comparable Analysis: A process of comparing the rents of similar properties in the same area to determine market rents.

Rent Premium: The additional rent charged for a unit with superior features or amenities based on market comparables.

Rent Roll: A document that lists the rental units in a property, the tenants occupying them, the rent they are paying. The rent roll may also include lease duration and other items charged to the tenants.

Residential Utility Billing System (RUBS): A system used to allocate utility costs to the tenants.

SDIRA: A Self-Directed Individual Retirement Account (SDIRA) is a type of retirement account administered through a custodian or trustee that allows individuals to invest in alternative assets such as real estate, private equity, and precious metals. The account holder of the SDIRA directs the investment. SDIRAs are best suited for savvy investors who already understand alternative investments and want to diversify in a tax-advantaged account.

Sophisticated Investor: A sophisticated investor is an investor who has sufficient knowledge and investment experience to make informed investment decisions.

Subscription Agreement: In the context of multifamily syndications, the subscription agreement is a contract between a company and an investor. The agreement specifies the number of units being purchased, the purchase price, terms of payment and the rights and obligations of the parties associated with the purchase of shares in the company.