The act of reducing something such as a taxes or rent for some period of time or
of eliminating something permanently.
Absorption
An estimate of the new occupancy, or amount of inventory that is being
“absorbed,” of a particular type of land use. Gross absorption is
a measure of the total square feet leased over a specified period with no
consideration given to space vacated in the same geographic area during the same
time period.
Acceleration Clause
A term in a loan agreement that requires the borrower to pay off the loan
immediately under certain conditions. In the absence of such a clause, then a
default on one payment would be just that: only one payment in default.
Acceleration clauses make the full amount of principal due (immediately, or
after a short grace period) upon the default as specified in the loan documents.
Accredited (Investor)
An accredited investor is a term used by the Securities and Exchange Commission
(SEC) under Regulation D to refer to investors who are financially sophisticated
and have a reduced need for the protection provided by certain government
filings. Accredited investors include individuals, banks, insurance companies,
employee benefit plans, and trusts. As per federal law, a natural person with
either $1,000,000 or more in net worth (excluding primary residence) or $200,000
annual income (or $300,000 with spouse) for past two years and reasonable
expectation of same for current year.
Accrue
Accrue is a benefit or sum of money being received by someone in regular or
increasing amounts over time: In finance, “accrue” is most commonly
used when referring to interest, income and expenses of an individual or
business.
Adjustable-Rate Mortgage (ARM)
Adjustable-Rate Mortgage in short ARM is a mortgage on which the interest rate is
not fixed for the entire life of the loan. The rate is fixed for a period at the
beginning, called the “initial rate period,” but after that it may change
based on movements in an interest rate index.
Adjusted Tax Basis
The net cost of an asset after adjusting for various tax-related items and such
reduced and adjusted basis is referred as Adjusted Tax Basis. In real estate
terms, this is generally the original cost of property (the original tax basis)
less any depreciation deductions plus any capital
expenditures. The adjusted tax basis is important when determining
final taxes (and tax rates) upon the sale of a property.
Amortization
Amortization is the paying off of debt with a fixed repayment schedule in regular
installments over a period of time. Each repayment installment of an amortizing
loan consists of both principal and interest.
Anchor Tenant
Anchor tenant is a major or key tenant is one of the larger stores in a shopping
mall or shopping center. These stores are “destination” stores and provide
exposure to smaller, satellite stores
Ancillary Tenant
A shopping center tenant that occupies a smaller space and is less of a draw than
an anchor tenant. Ancillary Tenants typically pay higher rents relative to
anchor tenants.
Angel (Investor)
An Angel investor is a prosperous individual who provides capital for a business
start-up, usually in exchange for an equity ownership interest. The term “angel”
arose in the entertainment industry, where investors would bankroll a production
for a share of the profits.
Appreciation
An increase in an asset value is referred to as “appreciation”.
Appraisal
An estimate of value, generally made by a professional appraiser who uses their
knowledge of the local area and recent sales in that area and concludes to
provide a guide as to the price that might be obtained for a particular
property. An appraisal of a property might be made not only to determine a
reasonable offering price in a sale, but also to determine an appropriate loan
size of a loan, to allocate a purchase price between land and building
(improvements), to determine an appropriate amount of hazard insurance, or for
estate tax purposes at the owner’s death.
As Is
Without Guarantees as to condition, as in a sale. May signal a problem in
condition, or may merely indicate that the seller is not in a position to attest
as to the property’s condition (as in a sheriff’s sale following a
foreclosure). Premises must be accepted by a buyer or tenant as they are,
including physical defects (other than hidden — or latent —
defects).
Assumable Loan
A mortgage loan that allows a new purchaser to undertake the obligation of the
loan with no change in loan terms. This is generally true of loans without
due-on-sale clauses. Most FHA and VA mortgages are assumable.
Audit
An audit is a professional and independent examination of a company’s
financial statements and accounting documents following generally accepted
accounting principles (GAAP). Under the JOBS Act, companies that look to raise
over $500,000 must have audited financial statements. This is not like an audit
from the IRS, which by contrast, is an examination of a taxpayer’s return
to verify whether the proper amounts of taxes have been paid.
B
Balance
The amount left over after subtracting the amount owed (on a loan) or the amount
remaining (in an account).
Balloon Payment
A balloon payment mortgage is a mortgage which does not fully amortize over the
term of the note, thus leaving a balance due at maturity. Example: A debt
requires interest-only payments annually for five (5) years, at the end of which
time the principal balance (a balloon payment) becomes due.
Basis (Tax)
The point from which gains, losses, and depreciation deductions are computed.
Generally the cost, or purchase price, of an asset.
Basis Point
A basis point is a unit of measure used in finance to describe the
percentage change in the value or rate of a financial instrument. A basis point
(bps) is a unit that is equal to 1/100th of 1%, in other words one basis point
is equal to 0.01%, and similarly a 1% change is equal to a 100 basis point
change.
Blind Pool
An investment program in which funds are invested into an entity without
investors knowing which properties will be purchased.
Bridge Loan
A bridge loan is a type of short-term loan, typically taken out
for a period of 2 weeks to 3 years pending the arrangement of larger loan or
longer-term financing.
Broker Price Opinion
The estimated value of a property as determined by a real estate broker
or other qualified individual or firm. A broker price opinion is based
on the characteristics of the property being considered.. A fee may be charged
for this service, but it may not be represented as an appraisal. While lenders
typically require an appraisal for mortgage lending purposes, some (particularly
in the asset-based lending sector) may be content with a broker’s price
opinion.
Broker-Dealer
A broker-dealer is a person or company that is in the business of buying and
selling securities—stocks, bonds, mutual funds, and certain other investment
products—on behalf of its customers (as broker), for its own account (as
dealer). In reference to “Crowdfunding,” one of the two types of
“Intermediaries” (“Portals” being the other) authorized by the “JOBS
Act” to handle the sale of crowd-funded securities (i.e. equity or debt
instruments) by an “issuing company”. Broker-dealers are regulated by the
federal Securities and Exchange Commission (SEC), the Financial Industry
Regulatory Authority (FINRA) (a “Self-Regulatory Organization” or “SRO”), and
sometimes the various states.
Buy and Hold
In real estate, Buy and Hold is an investment strategy whereby an investor
purchase and property and holds it for a long period of time, typically using
the property for rental income. “Buy and hold” investments can be
contrasted to “fix and flip” purchases, where investors seek only to
make some basic repairs or improvements and then to sell the property as quickly
as possible.
Buy-Sell Clause
An agreement among partners, LLC members, or stockholders in which some partners
/ members / stockholders agree to buy the interests of others, upon some event.
Blue Sky Laws
State specific regulations in the United States meant to protect investors from
fraud. These laws vary from state to state, but in general they require the
registration of all securities offerings and sales with each state’s appropriate
regulatory agency. Some SEC registration exemptions, such as Registration A Tier
2 offerings, pre-empt blue sky laws. That means if a securities offering adheres
to the SECs requirements it does not have to register and comply with different
blue sky laws in every state.
C
Capital
Capital is any financial asset or the value of an asset.
Capitalization (Cap) Rate
Cap Rates measure a property’s yield (return) in a one-year time frame.
Capital Call
A request made to existing equity owners for additional money in order to fund
deficits due to construction or operating costs.
Capital Gain
Gain on the sale of a capital asset like real property. Capital gains enjoyed on
assets held for a long term (generally at least one year) often enjoy lower tax
rates than ordinary income.
Cash Flow
Periodic payments available after deducting all other expenses applicable to
rental income, including operating and financing expenses. Can be contrasted
with net operating income, which deducts from gross rental income the
various operating expenses, but which does not also factor in the effect of
financing expenses.
Cash on Cash Return
The cash on cash return is a simple ratio measurement of an investor’s
return in relation to the cash actually invested. The cash on cash ratio is
determined by dividing the before-tax cash flow (net operating income less debt
payments) and dividing it by the initial equity investment.
Commercial Property
Property designed for uses other than personal residential purposes, often times
related to business activity. Commercial property includes (among other things)
retail shopping centers, multi-family apartment buildings, office buildings,
hotels and motels, and self-storage facilities.
Comparative or Competitive Market Analysis
An estimate of the value of a property using some indicators taken from sales of
comparable properties (such as price per square foot). These value estimates,
similar to a broker’s price opinion, are not appraisals and do not meet
the standards of appraisal as defined by regulatory bodies.
Compound Interest
Interest paid on the original principal and also on any accumulated (accrued) and
unpaid interest. Each year, interest is received on previously earned but
undistributed interest, so interest compounds.
Credit Report
The report is a record that contains the detailed information on a person’s
financial history, and an evaluation of a person’s capacity of debt
repayment. Generally available for individuals from credit repayment histories
and similar institutionally reported data.
Credit Score
Credit score refers to FICO score, which is created and calculated by the Fair
Isaac Corporation and it is a measure of an individual’s creditworthiness.
This number predicts the probability that a person will repay a loan. The score
is estimated from information contained in the individual’s credit report.
The higher the score, the better the risk.
Crowdfunding
Crowdfunding is the process of raising financial support for a venture via
smaller amounts from multiple investors (“the crowd”). Crowdfunding without
the expectation of financial return, or with the promise of a specific good or
service, are termed “donation-based” or “reward-based” crowdfunding, are in the
nature of charitable solicitation or business marketing. Soliciting funds in
return for an ownership interest or the expectation of repayment are termed
“equity-based” or “debt-based” crowdfunding (together grouped as
“securities-based” crowdfunding), and until recently effectively prevented by
federal and state securities law. One of the most significant parts (Title III)
of the federal Jumpstart Our Business Startups, or JOBS Act of
2012 specifically enabled and legalized “security-based crowdfunding,”
subject to a variety of regulations and restrictions. Crowdsourcing / Crowd
Sourcing: Crowdsourcing is the practice of engaging a ‘crowd’ or group for a
common goal — often innovation, problem solving, or efficiency. Participants
collectively contribute ideas, time, expertise, or funds to a project or cause.
D
Distributions
Payments made to investors periodically, typically over the course a calendar
year, either from profits or interest payments.
Debt
An amount of money (obligation) owed by one party (the debtor) to another party
(the creditor).
Debt Crowdfunding
Obtaining a loan from multiple lenders, often private individuals. The loan money
must be repaid with a fixed interest rate in an agreed upon amount of time.
Deed
A written document properly signed and delivered that conveys a title to real
property. There are different types of deeds that provide different levels of
assurance about the extent of the title being conveyed.
Deed of Trust
A legal instrument used in many states in lieu of a mortgage, where legal title
to a property is vested in one or more trustees to secure the repayment
of a loan. A deed of trust is an arrangement among three parties: the
borrower, the lender, and an impartial trustee
Default
Failure to perform a task or fulfill an obligation, especially failure to meet a
financial obligation.
Deficiency
In mortgage finance, a shortfall of funds recovered through the sale of property
securing a foreclosed loan compared to the amount of debt, accrued interest,
foreclosure expenses, and damages incurred by the lender.
Delinquent
Failure to repay an obligation when due or as agreed. Normally delinquency occurs
before a default is declared.
Demographics
The statistical data of a population, especially those showing average age,
income, education, etc
Depreciation
Depreciation is permanent and continuing diminution in the quality,
quantity or value of an asset. Depreciation refers mainly to tangible
assets.
Depreciation Recapture
Depreciation recapture is the gain received from the sale of depreciable
capital property that must be reported as income. Depreciation
recapture is assessed when the tax basis of an asset exceeds the sale
price.
Discounted Cash Flow
A method of investment analysis in which anticipated future cash income from an
investment is estimated and converted into a rate of return (generally the
internal rate of return, or IRR) based on the time value of
money. Alternatively, when a rate of return is specified, a net present value of
an investment can be estimated.
Donation Crowdfunding
Donation-based crowdfunding is a way to source money for a
project by asking a large number of individuals and businesses to
donate a small amount to it. Often donation crowdfunding is most
successful among charities and non-profits.
Due Diligence
Due diligence is an investigation or audit of a potential investment. In
real estate, this usually refers to the inquiries made in advance of a purchase
or investment in a property. Due diligence considers the physical, financial,
legal, and social characteristics of a property and its expected investment
performance.
E
Encumbrance
A burden, obstruction, or impediment on property that lessens its value or makes
it less marketable
Entity
The legal form under which property is owned
Equity
Ownership of a piece of a company as an investment.
Equity Crowdfunding
Funding projects and businesses through investments by people who then receive
equity ownership shares in the resulting company, product, or property.
Escrow
A contract, deed, bond, or other written agreement deposited with a third person,
by whom it is to be delivered to the grantee or promisee only upon fulfillment
of a condition.
F
Fair Market Value
The price that two parties are willing to pay for an asset or liability.
The fair market value is the theoretical highest price that a buyer
would pay, and the lowest price a seller would accept, assuming that both
parties were willing but not compelled to act.
FICO Score
A FICO score, created and calculated by the Fair Isaac Corporation, is a
measure of an individual’s creditworthiness. It is a mathematical summary
of the information on a person’s credit report.
First Lien (Mortgage or Deed of Trust)
A lien (often a deed of trust or a mortgage) that has priority over all other
liens. In cases of foreclosure, the first mortgage will be satisfied before
other mortgages.
Fix and Flip
A type of real estate investment strategy in which an investor purchases
properties requiring some immediate repairs, which when made will hopefully
translate into a more valuable property that can quickly be re-sold at a
profit. This strategy can be contrasted to a “buy and hold”
approach where the property is held for a longer period.
Foreclosure
Legal process by which a lender forecloses a borrower’s right of redemption
of the mortgaged property.
Free Cash Flow (FCF)
Free cash flow is a measure of a property’s ability to generate cash after
setting aside reserves for capital expenditures such as future development,
tenant improvements, and leasing commissions.
G
General Solicitation
The practice of advertising to potential investors outside of one’s current
network with the intent of fundraising, as is now allowed by the SEC for private
issuers under particular registration exemptions enabled in the JOBS act
General Partner
A member or partner in a partnership who has unlimited liability and is liable
for his portion of all partnership debts. All partners in an ordinary
partnership are general partners, while in a limited partnership most members
enjoy limited liability (although one partner must still be a general partner).
Green Building
A building that is built or developed specifically to minimize utility costs or
to maximize positive environmental considerations (i.e. to reduce damage to the
environment).
Gross Amount
Gross refers to the total amount before anything is deducted.
When deductions are taken, the amount is net.
Ground Lease
A long-term lease of land in which the tenant will erect improvements at its own
expense.
Guaranteed Investment
As defined by Arabgatewayfunds CrowdFunding: Guaranteed Investments pay a lower
rate of
return, but guarantee the investor protection from loss of principle. All
Arabgatewayfunds
Crowdfunding investments are protected by first liens and personal guarantees.
Contrast to Non-guaranteed Investment.
Guaranty
An assurance provided by one party that another party will perform under a
contract.
H
Hard Asset
Hard assets often refer to items such as buildings, cash or other
tangible and tradable assets. Hard assets are considered
particularly valuable because they can be used to produce, purchase, or trade
for other goods or services.
Holdback (Reserve)
Money not paid until certain events have occurred, such as a retained amount on a
loan involving construction work.
I
Investment Crowdfunding
Investing in a company or project via crowdfunding in exchange for equity
ownership, debt payments, a convertible note, or some other financial return.
Intermediary
Either a “Broker-Dealer” or a “Portal,” both allowed by the
JOBS Act to consummate a securities-based crowdfunding transaction.
Illiquid Asset
Illiquid describes an asset or security that cannot be sold
quickly due to a shortage of interested buyers or a lack of an established
trading market. Illiquid assets cannot be easily converted into cash
without potential for losing a significant percentage of their value.
Improvements
Additions to raw land that tend to increase the property’s value; similar
to developments. Improvements include not only buildings but also
public enhancements such as streets and sewers.
In-Fill Development
Improvements on a land adjacent or between existing developments. A way to
accommodate increased population in an area without spreading the outer
boundaries of development.
Income Property
Real estate developed or bought for the purposes of generating income (usually
rental income). Multi-family apartment buildings, retail shopping centers,
office buildings, industrial properties, resort and recreational properties,
self-storage facilities, and hotels are all considered income properties.
Industrial Property
Industrial properties include manufacturing facilities, warehouses, distribution
centers, and research & development space. Manufacturing and R&D
properties tend to be build-to-suit buildings that can be difficult to
“re-tenant” without extensive modifications, while warehouses and distribution
centers can be more generic buildings. Industrial properties tend to have long
leased terms.
Inflation
A loss in the purchasing power of money; an increase in the general price level.
Generally they are measured by the Consumer Price Index (CPI), a statistic
published by the U.S. Bureau of Labor Statistics.
Intrastate Crowdfunding
While the Securities and Exchange Commission regulates public securities on a
national level, each state also has its own regulatory entity serving a similar
function. Since the passage of the JOBS Act, advocates of crowdfunding have
moved to legalize intrastate – or in state – crowdfunding.
Internal Rate of Return (IRR)
Internal rate of return (IRR) is the interest rate at which the net present value
of all the cash flows (both positive and negative) from a project or investment
equal zero. Internal rate of return is used to evaluate the attractiveness of a
project or investment
Issuer
The term issuer refers to a legal entity, i.e., government, corporation, or
investment trust that develops, registers, and sells securities to the investing
public in order to finance its own operations.
J
JOBS Act:
The JOBS Act (Jumpstart Our Business Startups Act) is legislation that eases
regulatory restrictions for new businesses to make it easier for startups to get
established.
Judicial Foreclosure
A foreclosure which results from a court action rather than from the power of
sale given to a trustee. Judicial foreclosures occur when a trust deed or
mortgage deed does not have a power of sale clause, thus compelling the lender
to take the borrower to court.
KL
Letter of Intent (LOI)
A letter from between parties acknowledging a willingness and ability to do
business.
Limited Liability
Limited liability is where a person’s financial liability is limited to a
fixed sum, most commonly the value of a person’s investment in a company
or partnership.
Limited Liability Company (LLC)
A limited liability company is a hybrid type of legal structure that provides the
limited liability features of a corporation and the tax efficiencies and
operational flexibility of a partnership. The “owners” of an LLC are
referred to as “members.” Depending on the state, the members can
consist of a single individual (one owner), two or more individuals,
corporations, or other LLCs.
Limited Partnership
A special type of partnership which is very common when people need funding for a
business, or when they are putting together an investment in a real estate
development. A limited partnership requires a written agreement between the
business management, who is the general partner, and all of the limited
partners.
Liquidity
The ease with which assets may be converted into cash.
Loan-to-Value Ratio (LTV)
A Loan to value ratio of how much is being borrowed to the value of the
property.
Loan-to-Cost Ratio (LTC)
The loan-to-cost ratio is defined as the ratio of the construction loan to the
total cost of a construction project.
M
Market Area
A market area is the geographic region where a specific good or service is
offered for sale. The market area, or trade zone, differs from business to
business based on demand, sales goals, and marketing techniques
Maturity
The due date of a loan.
Mezzanine Debt vs. Preferred Equity
Mezzanine Debt is generally a loan that is secured by a property and senior to
any equity, but junior to the senior loan on the property. Preferred Equity, on
the other hand, is an equity investment in the property-owning entity. It is not
secured by the property but rather by an interest in the entity investing in (or
owning) the property.
Mezzanine Financing
High-yield debt issued in connection with a leveraged buyout. Mezzanine Financing
is listed on a company’s balance sheet as an asset. Some companies use mezzanine
financing because it makes it easier for them to obtain financing from other
sources.
Multi-Family Housing
A building or structure that is designed to house several different families in
separate housing units. The most common type of multifamily housing is an
apartment building. Duplexes, quadruples, and some townhomes also qualify as
multifamily housing.
N
Net Operating Income
Net operating income (NOI) is a calculation used to analyze real estate
investments that generate income. Net operating income equals all revenue from
the property minus all reasonably necessary operating expenses.
Net Worth
Net worth is the difference between the assets and the liability of an individual
or a company.
Non-guaranteed Invesment
As defined by Arabgatewayfunds CrowdFunding: Non-guaranteed Investments pay a
higher rate of
return, but the principle is more at risk. All Arabgatewayfunds Crowdfunding
investments are
protected by first liens and personal guarantees. Contrast to Guaranteed
Investment.
Nonrecourse
Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured
by a pledge of collateral, typically real property, but for which the borrower
is not personally liable.
Note
Sometimes referred to as a promissory note, a note is a written document
that evidences a debt and a promise to pay. The note is usually a separate
document from the mortgage (or deed of trust), which pledges the designated
property as security for the debt.
O
Occupancy Rate
The percentage of total units that are currently rented.
Office Building
A structure used primarily for the conduct of business relating to
administration, clerical services, consulting, and other client services not
related to retail sales. Office buildings can hold single or multiple firms.
Operating Expenses
An expense incurred in carrying out an organization’s day-to-day
activities, but not directly associated with production.
Opportunistic
An aggressive (or more risky) investment strategy that in real estate generally
signifies investing in properties that require a high degree of rehabilitation
in order to eventually earn “market” rental rates. Properties
requiring a greater amount of repairs, or rehabilitation, are generally
considered “high risk,” because the property has not yet proven
whether it can indeed earn the rents that are forecast for it when it will be
improved to the desired state.
Ordinary Income
Ordinary income is income that is taxed at ordinary income tax rates and does not
qualify for capital gains tax treatment. It’s important to understand the
difference between ordinary income and capital gain income because, generally,
ordinary income tax rates are higher than capital gains tax rates. Income such
as salaries, interest payments, dividends, and many other items are considered
ordinary income.
Origination Fees
A fee charged by a lender to a borrower on initiation of a loan, often as a
percentage of the total principal.
P
Partition
The division of real property between those who earlier owned it together with an
undivided interest.
Pre-Sales Crowdfunding
Pre-Sales Crowdfunding is an offset of rewards Crowdfunding. It is most
associated for a new product or invention where the company looking for funds
will promise the contributor a sample of the product on completion in exchange
for a minimum payment.
Peer to Peer (P2P) Lending
Peer-to-peer lending (P2P) is a method of debt financing that enables individuals
to borrow and lend money – without the use of an official financial
institution as an intermediary
Personal Liability
An individual’s responsibility for a debt. Most mortgage loans on real
estate are recourse, meaning that the lender can look to the property
and to the borrower for repayment. This can be contrasted to
nonrecourse loans, where a lender can only look to the security (the pledged
property) for repayment
Portfolio
A group of investment assets.
PIPR (Private Issuer Publicly Raising)
A company raising money from investors taking advantage of Regulation D Rule
506(c) which allows general solicitation to the public.
Portfolio Diversification
Portfolio diversification is the means by which investors minimize or eliminate
their exposure to company-specific risk, minimize or reduce systematic risk and
moderate the short-term effects of individual asset class performance on
portfolio value.
Private Offering
An offering of a real estate security that is exempt from registration with state
or federal regulatory agencies because it does not involve a public offering.
It’s typically made to a small group of investors. Private offerings must adhere
to the rules of any one of several SEC registration exemptions.
Prepayment
The payment of a debt in full before it is due. Prepayment is good for the
borrower because it relieves him/her of the debt, but it deprives the lender of
interest.
Prepayment Penalty
A prepayment penalty, also known as a “prepay” in the industry, is an agreement
between a borrower and a bank or mortgage lender that regulates the terms in
connection with a prepayment.
Principal
The amount of money raised by a mortgage or other loan that still remains after
some of that amount may have been amortized by earlier payments. Principal can
be contrasted to the interest paid on the loan.
Priority
Legal precedence having preferred status. Generally, upon foreclosure, lenders
are repaid according to priority.
Pro-Forma
A financial model often used in real estate to predict future cash flows and
total investment returns.
Promissory Note
Another term for note. A legal document that evidences a debt, specifying how
much money is being borrowed and the terms and conditions under which it is to
be repaid.
QR
Real Estate Crowdfunding
Real estate crowdfunding involves using equity and debt funding to finance real
estate purchases using multiple investors.
Recorder
An officer (usually of the local county) appointed or elected to keep records of
deeds or other official papers concerning real property that are used to show
evidence of title. Sometimes known as the registrar or county clerk.
Recording
The act of entering in a book of public records the legal documents that affect
the title to a piece of real property. Recording in this manner gives notice to
the world of the facts recorded.
Recourse
The ability of a lender to claim money from a borrower who is in default in
addition to the property pledged as collateral.
Refinance
To replace an existing loan(s) with a new loan(s).
Regulation D
Regulation D permits raises of unlimited amounts from accredited investors
without registering a public sale through the SEC, as it’ is assumed that
accredited investors are financially able to bear the burden of investment
decisions without a review by the SEC.
Regulation A+
Regulation A+ is the SEC’s proposed revision of the current Regulation A, which
was mandated by the JOBS Act in 2012.
Regulation A
Regulation A allows unaccredited investors to purchase small offerings of
securities that do not exceed $5 million in a 12-month period.
Redemption
In the event of back taxes or unpaid liens, a borrower who pays off those debts
may reclaim their property, preventing foreclosure or the auctioning of their
property.
Real Estate
Real estate includes a parcel of land and any of its permanent structures
(buildings, parking lots, etc.).
REIT
A REIT, or Real Estate Investment Trust, is a company that owns or finances
income-producing real estate. Modeled after mutual funds, REITs provide
investors of all types regular income streams, diversification and long-term
capital appreciation.
Retail Property
Retail property is a classification of zoning for property that is used for a
store, shopping center or service business. The retail sector includes
everything from smaller neighborhood shopping centers (encompassing, for
example, a small grocery, pharmacy and a few restaurants or clothing stores) to
large “super-regional” malls that have entertainment activities and can draw
shoppers from a great distance.
Risk
Uncertainty or variability; the possibility that returns from an investment will
be less than forecast, or that invested principal might be lost.
Risk vs. Return
The risk-return tradeoff is the principle that potential return rises with an
increase in risk. Low levels of uncertainty (low-risk) are associated with low
potential returns, whereas high levels of uncertainty (high-risk) are associated
with high potential returns.
Reward
Something given to investors in exchange for their funds while crowdfunding,
either the first run of an actual product, or a shirt, sticker, or small object
related to the project or company being funded, or even just a “thank you”
acknowledgement.
Rewards Crowdfunding
Rewards based crowdfunding is a collective effort involving a group of people
(the crowd, contributors, backers) and a project creator (project owner or
campaign manager) to fund a specific venture.
ROI
Return on investment (ROI) measures the gain or loss generated on an investment
relative to the amount of money invested.
S
S.E.C. Securities and Exchange Commission.
The part of the United States government that regulates investment and finance,
including startups and the various forms of crowdfunding.
Securities
Securities include stocks, bonds, and certificates. These serve as financial
and/or investment instruments that hold certain values and that can be bought,
sold, and exchanged.
Securities Law
Securities regulation in the United States is the field of U.S. law that covers
transactions and other dealings with securities. Generally, Securities Laws are
the laws by the federal government (mostly through the SEC) or by each state.
Semi-Liquid Withdrawal Option™
Arabgatewayfunds Crowdfunding offering. Investors should anticipate a 12 – 60
month holding
period based on the their selected investment. Should an investor require, they
can cash-out or withdraw their full or partial guaranteed investment at anytime
with our Semi-Liquid Withdrawal Option™ Arabgatewayfunds Crowdfunding will use
commercially
reasonable efforts to accommodate the Investor’s request within 90 days of such
a request, but shall not be required to borrow money or dispose of assets to
fund such a request or take any other action that would, in the sole discretion
of the Arabgatewayfunds CrowdFunding, be adverse to the interests of the Company
or its
other clients. When an Investor requests a withdrawal of all or a portion of
the Investor’s guaranteed investment prior to maturity, based on the provisions
in this section, then Arabgatewayfunds CrowdFunding may charge a processing fee
of no less
than $850 per note and reduce the amount returned to the Investor by an amount
equal to all the Funding Bonuses paid to the Investor on those funds in
the preceding twelve months.
Single Family Residence
In real estate, generally refers to a stand-alone property intended to house one
family. Individual apartment or condominium units are usually thought of as
being part of a multi-family building, even though individual units are
usually occupied by a single family.
Statutory Foreclosure
The foreclosure of a lien on property without using a lawsuit but is based on
existing statute. A foreclosure proceeding is not conducted under court
supervision; contrast with judicial foreclosure.
Subordination
Moving to a lower priority, as a lien would if it changes from a first mortgage
to a second mortgage.
Syndication
The formation of a group of investors, organized by a sponsor, that pools the
investors’ capital together in order to make an investment. In real
estate, such pools (or syndicates) are often formed because even a single
property can require substantial capital, usually beyond the means of a single
investor.
T
Tenancy in Common (TIC)
Tenancy in common is a way for two or more people to have equal ownership
interests in a property. Each owner has the right to leave his or her share of
the property to any beneficiary upon the owner’s death.
Tenancy / Occupancy
Occupancy is generally referred to as a percentage of the total square feet or
units leased – it is a building’s revenue source.
Term
The lifespan of a given asset or liability.
Title
In Property Law, a comprehensive term referring to the legal basis of the
ownership of property, encompassing real and Personal Property and intangible
interests therein.
Title Insurance
Title Insurance covers the loss of an interest in a property due to legal defects
and is required if the property is under mortgage. Most title insurance is
lender’s title insurance, which is paid for by the borrower but protects
the lender.
Transparency
In finance, a manner of doing business such that activities are fully disclosed
and reported to investors. Such policies make it possible for potential
investors to adequately estimate the risk, and to forecast the income, from
investing.
U
Unaccredited Investor
An investor who does not meet the wealth requirements of an accredited investor
set forth by the SEC.
Underwrite
Underwriting is the process by which investment bankers raise investment capital
from investors on behalf of corporations and governments that are issuing
securities.
Undivided Interest
Ownership claim of property or assets commonly owned with restricted claims but
no one has an exclusive claim.
V
Vacancy Rate
The percentage of all units or space that is unoccupied or not rented.
Value-Add
A real estate property categorization, or investment “style,” that
refers to properties requiring some degree of improvements to gain increased
returns. “Value-add” generally refers to a property that is
currently in less than stellar condition and in need of improvements that are of
somewhat higher risk, such as performing more-than-usual renovations like
upgrading exteriors and interiors and curing deferred maintenance.
WXY
Yield
Another term for the internal rate of return (IRR), a measure of an
investment’s return rate that takes account of the time value of money.
Z
Zoning
A legal mechanism for local governments to regulate the use of privately owned
real property by applying their power to prevent conflicting land uses and
promote orderly development. Designated zones limit the type and intensity of
permitted development.
Arabgatewayfunds CrowdFunding
A debt-based real estate crowdfunding platform comprised of proven real estate
financing professionals over a decade of success. Arabgatewayfunds CrowdFunding
pre-funds
all qualified projects and specializes in: Quick Closings, Fix & Flip Real
Estate Projects, Fix & Hold Real Estate Projects, Non-Traditional Borrowers,
Distressed Properties, Transactional/Gap Financing, Foreclosure/Trustee Sales,
Auctioned Properties, Probate Properties Needing Repairs, Refinancing, Temporary
to Permanent Financing, any Opportunistic Acquisitions.