Real Estate Investing Glossary

New to real estate investing? This glossary breaks down the most common terms you'll encounter when analyzing rental properties in Temple, Belton, and Central Texas. These definitions are written in plain English by an active investor — not a textbook.

Investment Strategies

BRRRR (Buy, Rehab, Rent, Refinance, Repeat) 

A strategy where you purchase a distressed property below market value, renovate it to force appreciation, rent it out to a tenant, refinance to pull your initial capital back out, then repeat the process with the next property. Popular in Temple TX due to older housing stock with value-add potential.

Turnkey Property 

A property that is fully renovated, tenanted, and often professionally managed — ready for immediate cash flow with minimal effort from the investor. Ideal for out-of-state investors who want passive income without managing renovations or tenant placement.

House Hacking 

Living in one unit of a multi-family property (duplex, triplex, fourplex) or renting out bedrooms in a single-family home so that tenant rents cover part or all of your mortgage payment. A common first step for new investors.

Fix and Flip 

Purchasing a property below market value, renovating it quickly, and selling it for a profit. Unlike BRRRR, you don't hold the property long-term. Profit depends on accurate rehab budgets and selling in a timely market.

Buy and Hold 

Purchasing a property and holding it long-term (5+ years) for rental income and appreciation. The core strategy for building wealth through real estate over time.

Mid-Term Rental (MTR)

A rental period of 30 days to 6 months, typically targeting traveling nurses, medical professionals, or corporate relocations. Offers higher income than traditional long-term rentals with less turnover than short-term (Airbnb-style) rentals. Popular near Baylor Scott & White Medical Center in Temple.

Short-Term Rental (STR) 

Rentals of less than 30 days, typically listed on platforms like Airbnb or VRBO. Requires more active management but can generate higher gross income in the right location.

Financial Metrics

Cash Flow 

The money left over each month after collecting rent and paying all expenses (mortgage, taxes, insurance, maintenance, vacancy reserves). Positive cash flow means the property makes money; negative cash flow means you're paying out of pocket.

Cash-on-Cash Return (CoC) 

Annual cash flow divided by total cash invested, expressed as a percentage. Measures the return on your actual dollars invested. Example: If you invested $50,000 and net $5,000/year in cash flow, your CoC return is 10%.

Calculate Your Cash On Cash Return HERE (Deal Analyzer)

Cap Rate (Capitalization Rate) 

Net Operating Income (NOI) divided by the property's purchase price, expressed as a percentage. Used to compare properties regardless of financing. A 6% cap rate means the property generates 6% of its value in net income annually before debt service.

Net Operating Income (NOI) 

Gross rental income minus operating expenses (taxes, insurance, maintenance, vacancy, property management). Does NOT include mortgage payments. NOI tells you how much the property earns before financing costs.

The 1% Rule 

A quick screening rule: monthly rent should equal at least 1% of the purchase price. A $250,000 property should rent for at least $2,500/month to be worth analyzing further. Not a guarantee of profitability — just a first filter.

Gross Rent Multiplier (GRM)

 Purchase price divided by annual gross rent. A lower GRM generally indicates a better deal. Example: A $250,000 property renting for $25,000/year has a GRM of 10.

Debt Service Coverage Ratio (DSCR) 

NOI divided by annual mortgage payments. Lenders use this to determine if the property generates enough income to cover the loan. A DSCR of 1.25 means the property earns 25% more than needed to pay the mortgage.

Property & Loan Terms

LTV (Loan-to-Value Ratio) 

The loan amount divided by the property's appraised value. An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV = more equity, better loan terms.

Equity 

The difference between what a property is worth and what you owe on it. If your home is worth $300,000 and you owe $200,000, you have $100,000 in equity.

Appreciation 

The increase in a property's value over time. Can be natural (market-driven) or forced (through renovations). Temple TX has seen approximately 46% appreciation over the past 5 years.

Vacancy Rate 

The percentage of time a rental property sits empty. Expressed as a percentage of annual income. An 8% vacancy rate assumes roughly one month vacant per year. Lower vacancy = more income.

CapEx (Capital Expenditures) 

Major repairs or replacements (roof, HVAC, water heater, appliances) that occur infrequently but cost significantly. Smart investors reserve a portion of monthly rent (typically 5-10%) for future CapEx.

ARV (After Repair Value) 

The estimated market value of a property after renovations are complete. Critical for BRRRR and fix-and-flip investors to calculate potential profit.

Have Questions?

Still confused about a term? Want to know how these metrics apply to a specific Temple or Belton property? Schedule a free consultation and I'll walk you through the numbers.