Multifamily Housing Terminology: Your A-Z Guide

The voluntary relinquishment of a real estate property by the owner or tenant, including land or housing units, without intention to reclaim or resume ownership/tenancy.

The total amount of depreciation expense recorded for an asset from its acquisition date to the most recent reporting period, expressed in dollars.

The process of obtaining ownership or control of a property.

A federal civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including housing. The ADA requires certain accommodations and accessibility features in multifamily properties.

Residential units, either rental or owner-occupied, that are deemed affordable for those with a median household income or below as rated by the national government or a local jurisdiction. Often, these properties are governed by a federal or state agency that regulates rent levels and eligibility criteria.

Desirable or useful features of a property, both tangible (e.g., fitness center, swimming pool) and intangible (e.g., scenic views, convenient location), that enhance its value or attractiveness to residents.

The gradual reduction of a debt or mortgage over a specified period through regular payments. Each payment includes a portion of interest and principal, with the principal portion increasing over time as the loan balance decreases.

The dollar amount an asset has depreciated in the most recently completed fiscal year.

A self-contained residential unit that occupies part of a larger building. Apartments are typically leased to tenants for a fixed term, though some may be owned as condominiums.

A professional assessment of a property's market value based on factors such as location, condition, amenities, and recent sales of similar properties in the area.

An increase in a property's value over time due to market conditions, inflation, or improvements made to the property.

The ongoing process of managing a property and its operations to maximize value and returns.

Rent or other income that is deemed uncollectible, often due to a tenant's failure to pay. Bad debt is written off as a loss on the property's income statement.

A large, lump-sum payment due at the end of a mortgage or loan term, typically following a period of smaller, regular payments.

A licensed professional who represents buyers, sellers, or renters in real estate transactions. Brokers often oversee a team of agents and ensure compliance with state and national real estate laws.

A system for categorizing commercial and multifamily properties based on quality, location, and amenities. Common classifications include Class A (high-end, well-located), Class B (mid-range, well-maintained), and Class C (older, basic amenities).

Fees paid by tenants to cover the upkeep and repair of shared spaces in a multifamily property, such as lobbies, hallways, and landscaping. CAM fees are typically included in the monthly rent.

A measure of a property's potential rate of return, calculated by dividing the net operating income by the property's value or purchase price. Cap rates are used to compare the relative value of similar properties.

Funds used to acquire, improve, or maintain a long-term asset, such as a building or major equipment. CapEx is typically budgeted separately from ongoing operating expenses.

The net income generated by a property after accounting for all income and expenses, including mortgage payments, taxes, and maintenance costs.

A legal document issued by a local government agency certifying that a building is safe and suitable for occupancy. A CO is typically required before tenants can move into a new or renovated multifamily property.

Incentives offered by landlords to attract tenants, such as free rent for a specified period, waived fees, or apartment upgrades. Concessions are common in competitive rental markets.

A type of housing where individual units are owned separately, but common areas (e.g., grounds, amenities) are owned jointly by all unit owners. Condos are typically governed by a homeowners association (HOA).

A lease agreement where two or more tenants share legal responsibility for renting a property. Co-tenants are jointly liable for rent and any damages.

A promise or agreement written into a contract, such as a lease or mortgage, that requires or prohibits certain actions. Common covenants in multifamily housing include restrictions on subleasing or property use.

The amount of money needed to cover the repayment of interest and principal on a loan, typically expressed on a monthly or annual basis.

A legal document that transfers ownership of a property from one party to another. Deeds are recorded with the local county clerk's office.

Failure to fulfill the terms of a lease or loan agreement, such as missing rent payments or violating a covenant. Defaults can lead to penalties, eviction, or foreclosure.

A decrease in an asset's value over time due to wear and tear, age, or obsolescence. Depreciation is an important tax concept in multifamily housing.

The investigation and evaluation process before a purchase to ensure all relevant information about the property is understood.ws owners to deduct a portion of a property's value each year.

A multifamily home that contains two separate dwelling units, either side by side or stacked on top of each other, each with its own entrance. Duplexes are often owned by a single entity and rented out to tenants.

A deposit made by a prospective buyer to demonstrate their commitment to purchasing a property. Earnest money is typically held in escrow and applied to the down payment or closing costs at settlement.

A legal right to use another person's land for a specific purpose, such as accessing a shared driveway or running utility lines. Easements can impact the value and use of multifamily properties.

A property's gross potential rent plus other income, minus vacancy and credit losses. EGI is a key metric for assessing a multifamily asset's financial performance.

The actual rental income collected per unit after accounting for concessions, vacancies, and other factors. Effective rent is typically lower than the quoted or "face" rent.

The difference between a property's market value and the outstanding mortgage balance. Equity represents the owner's financial stake in the property and can increase over time as the mortgage is paid down or the property appreciates.

A financial arrangement where a third party holds and regulates payment of funds required for a real estate transaction, such as earnest money, insurance premiums, or property taxes. Escrow ensures all parties fulfill their contractual obligations.

A signed document that outlines the current terms of a lease agreement, including rent amount, security deposit, and any outstanding obligations. Estoppel certificates are often requested during the due diligence process when a property is being sold.

The legal process by which a landlord removes a tenant from a rental property for violating the terms of the lease, such as non-payment of rent or damage to the unit. Eviction procedures are governed by state and local laws.

A plan for how an investor intends to sell or dispose of an investment property to realize a profit.

A federal law that prohibits discrimination in the sale, rental, and financing of housing based on race, color, national origin, religion, sex, familial status, or disability. The FHA applies to most multifamily properties.

The median rent for a particular housing type in a specific geographic area, as determined by the U.S. Department of Housing and Urban Development (HUD). FMRs are used to determine payment standards for government housing assistance programs.

Costs that remain relatively constant regardless of occupancy levels or other factors, such as property taxes, insurance, and some utilities. Fixed expenses are an important consideration in multifamily budgeting.

The mechanism of providing funds for purchasing a property, which can include equity and debt financing.

A legal process in which a lender takes possession of a mortgaged property when the borrower fails to make payments or violates other loan terms. Foreclosed multifamily properties are often sold at auction to recover the outstanding debt.

A type of commercial lease where the tenant pays a fixed amount of rent and the landlord is responsible for property expenses, such as taxes, insurance, and maintenance. Gross leases are less common in multifamily housing than in office or retail properties.

The total income generated by a property before expenses are deducted, including rent, parking fees, laundry revenue, and other sources.

The maximum rental income a property could generate if all units were occupied and all rents were collected, prior to any deductions for vacancy, concessions, or credit losses.

The total income generated from a property before any expenses are deducted.

A rough measure of a rental property's value, calculated by dividing the sale price by the annual gross rental income. GRM is a quick way to compare the relative value of similar properties but does not account for operating expenses.

A long-term lease agreement where the tenant rents land from the owner to develop or improve, such as constructing a multifamily building. At the end of the ground lease, the land and all improvements typically revert to the owner.

A person who agrees to be legally responsible for another party's debt or obligations under a contract, such as a lease. Guarantors are often required when a tenant has limited or poor credit history.

Direct costs associated with the physical construction or renovation of a property, such as labor, materials, and equipment. Hard costs are distinguished from soft costs, which include fees, permits, and other indirect expenses.

A provision in a contract that releases one party from liability for any damages or losses incurred by the other party. Hold harmless clauses are common in multifamily construction and vendor agreements.

The systems used to control indoor air quality and temperature in a building. HVAC is a major operating expense in multifamily properties and is often a significant capital expenditure item.

Any alterations or additions made to a property that increase its value, such as renovations, upgrades, or new amenities. Improvements can be made by either the owner or the tenant, depending on the lease terms.

The right to enter and exit a property, typically via a designated access point such as a door, gate, or easement. Ingress/egress rights are important considerations in multifamily properties, particularly for fire safety and accessibility.

A legal principle that allows a creditor to pursue all parties to a contract for the full amount owed, regardless of their individual share of responsibility. Joint and several liability is common in co-tenancy leases, where all tenants are equally liable for rent and damages.

A legally binding contract that outlines the terms under which a tenant rents a property from a landlord, including the length of the tenancy, rent amount, and any restrictions or obligations.

The process of initially renting out units in a new or renovated multifamily property, often with the goal of reaching a target occupancy rate within a specific timeframe. Lease-up periods can last several months and may involve concessions or other incentives to attract tenants.

A preliminary agreement that outlines the key terms of a proposed real estate transaction, such as the purchase price, due diligence period, and closing date. LOIs are non-binding but indicate a serious intent to move forward with a deal.

A legal claim against a property that grants the lienholder a security interest until a debt or obligation is satisfied, such as a mortgage, tax lien, or mechanic's lien for unpaid construction work.

The difference between a property's gross potential rent and its actual rental income, often expressed as a percentage. Loss to lease accounts for factors such as vacancies, concessions, and below-market rents.

A federal program that provides tax incentives for the development or rehabilitation of affordable housing. LIHTC properties are subject to income restrictions and rent limits for a specified compliance period.

The process of preparing a vacant unit for a new tenant, including cleaning, painting, repairs, and other necessary turnover tasks. Make-ready costs are a significant operating expense in multifamily properties.

The prevailing rent for a particular type of unit in a specific geographic area, based on factors such as location, size, age, and amenities. Market rent is used as a benchmark for setting prices and evaluating the competitiveness of a property.

The process of evaluating the local real estate market to determine property values and rental rates.

A lease agreement where a single entity rents an entire building or a large block of units from the owner, then subleases the units to individual tenants. Master leases are often used by corporate housing providers or short-term rental operators.

A type of residential property that contains multiple separate housing units, such as an apartment complex, condominium building, or townhouse development. Multifamily properties are distinct from single-family homes or duplexes.

A type of lease where the tenant is responsible for some or all of the property expenses in addition to base rent, such as utilities, maintenance, or insurance. The three main types of net leases are single net (N), double net (NN), and triple net (NNN).

A property's gross operating income minus its operating expenses, excluding debt service and capital expenditures. NOI is a key metric for evaluating the financial performance and value of a multifamily asset.

The difference between the present value of a property's expected future cash inflows and outflows over a specified holding period, discounted at the investor's required rate of return. NPV is used to assess the profitability and feasibility of a multifamily investment.

A use of a property that was legal when it was established but no longer complies with current zoning regulations, such as a multifamily building in an area that has been rezoned for single-family homes. Nonconforming uses are typically grandfathered in but may face restrictions on expansion or rebuilding.

The percentage of units in a multifamily property that are currently leased and occupied by tenants. Occupancy rate is a key indicator of a property's performance and is closely related to vacancy rate.

A property's operating expenses divided by its gross operating income, expressed as a percentage. OER is used to assess the efficiency and profitability of a multifamily asset, with lower ratios indicating better performance.

The prorated amount of rent charged to a tenant for occupying a unit for less than a full month, typically at the beginning or end of a lease term. Partial months' rent is calculated based on the number of days occupied and the monthly rent amount.

A lease provision that allows the landlord to bill tenants for certain property expenses in addition to base rent, such as utilities, trash removal, or property taxes. Pass-throughs are a way for owners to mitigate rising costs and maintain profitability.

A type of lease where the tenant pays a base rent plus a percentage of their gross sales above a specified threshold. Percentage leases are rare in multifamily properties but are sometimes used for ground-floor retail spaces.

A type of investment in a multifamily property that has priority over common equity but is subordinate to debt. Preferred equity investors typically receive a fixed return and have limited upside potential but also have lower risk than common equity holders.

A financial projection or model that estimates a property's future income, expenses, and cash flows based on assumptions about rent growth, occupancy, and other factors. Pro formas are used to evaluate the feasibility and profitability of a multifamily investment.

The day-to-day operation and oversight of a multifamily property, including leasing, maintenance, rent collection, and financial reporting. Property management can be performed by the owner or a third-party management company.

A legally binding contract that outlines the terms and conditions of a real estate transaction, including the purchase price, closing date, and any contingencies or representations.

A rating system used to classify multifamily properties based on their construction quality, amenities, and overall condition, typically ranging from A+ (luxury) to D (below average).

A detailed document listing all units in a multifamily property, including current tenants, lease terms, rental rates, and payment status.

A performance measure used to evaluate the profitability of a multifamily investment, calculated by dividing the net profit by the total investment cost.

A company that owns, operates, or finances income-producing real estate, providing investors with a way to earn a share of the income without having to buy, manage, or finance any properties themselves.

A federal housing program that provides rental assistance to low-income tenants through housing choice vouchers or project-based subsidies.

The point at which a multifamily property reaches and maintains its projected long-term occupancy rate, typically 90-95%.

A status indicating that a tenant is in violation of their lease terms, often due to non-payment or other infractions.

Modifications made to rental properties to accommodate a tenant's requirements, often negotiated as part of a lease.

A property that is ready to be occupied or leased out with minimal or no additional work required.

The process of evaluating the risk of insuring a mortgage loan or the financial viability of the property and borrower during lending.

The variety and distribution of apartment types within a multifamily property (studio, 1-bedroom, 2-bedroom, etc.).

The income lost due to unoccupied units or non-paying tenants in a multifamily property.

A numerical rating that measures the walkability of a property's location based on proximity to amenities, public transit, and other destinations.

Unique features or characteristics that give a multifamily property a competitive advantage in its market.

The income return on a multifamily investment, typically expressed as a percentage of the property's value or purchase price.

Local government regulations that determine how a property can be used and what type of structures can be built on it, affecting multifamily development and operations.