Real estate is a booming business in the US. After all, who doesn’t need a place to stay, right? But as exciting as the prospect is, potential homeowners, come face to face with a lot of words that just go way over their heads.

From abbreviations to the fancy terms that are used in nearly every contract or estate advertisement, we’ve compiled some of the most widely used abbreviations and words so you can get rid of the confusion you feel around real estate circles!

Real Estate LLC

You’ve probably seen LLC stamped at the end of company names all the time. The full form of LLC is ‘Limited Liability Company.’ Essentially, this means that the company is its own legal entity and also a real estate business. Forming an LLC is beneficial for investors who hope to reduce taxation and increase their investments.

ROI

ROI stands for return on investment and is a ratio through which you can calculate the initial value of investment vs. the investment’s final value. The difference is found in the profit made in the investment. The higher the ROI, the higher the rate of profit.

Cap Rate

Cap Rate is an abbreviation for Capitalization Rate. The cap rate indicates the rate of return or profit that a real estate investment property will generate. Buyers look for higher cap rate values because this indicates that the property is generating higher capital than its investment value.

CMA

A CMA or a Comparative Market Analysis is a report that’s gathered before the buying or selling process is initiated. Within the report, a study is done on the value of the homes within the locality to derive an accurate value for the property.

Equity

A very widely used term in real estate conversations, equity basically means ownership. Equity is used to calculate the amount of the home you actually own on the basis of the % of loan you have paid off. For example, if you bought a home worth $150,000 and still have to pay $100,000 to complete your mortgage, your current equity would be $50,000. This term extends to any assets you own that provide a return.

Understanding all the terms used in real estate will take months or even a year. Many individuals study these terms in colleges to better grasp the nuances attached to them. If you would like someone to decipher these terms for you, get in touch with us at Kalicki Collier. We provide expert real estate attorneys who will walk you through all the jargon and help you with your contracts and real estate planning.