WORD OF THE DAY

Absorption Period

In multifamily rental properties, this metric measures the rate at which available units are rented (typically over 12 months), and is adjusted to reflect a property’s turnover rates during the specified period.

Source: Danter
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> Absorption Period

WORD OF THE DAY

Absorption Rate

The rate that available units that are expected to rent.  It is calculated as the total number of units rented divided by the total number of units listed (e.g., 42 units rented ÷ 60 units for rent = 70% absorption).

Source: Investopedia
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> Absorption Rate

WORD OF THE DAY

Amenities

Tangible benefits associated with increasing the value of a real estate property, which range from inclusive items (plumbing, air-conditioning, etc.) to curbside appeal and location among other factors considered important to tenants.

Source: Danter
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> Amenities

WORD OF THE DAY

Comparable Market Rent

The comparable price of rent in a market area.  Also known as “fair market” rent, there are various factors that determine fair rental prices, with calculations based on scientific regression analysis of rental units in a given vicinity.

Source: Zilpy
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> Comparable Market Rent

WORD OF THE DAY

Contract Rent

An rental agreement (lease) between a landlord and tenant, with rental costs determined by the property owner (aka “street” rent).

Source: Wikipedia
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> Contract Rent

WORD OF THE DAY

Cooperative (Co-op)

One or more residential buildings used for single-family ownership, condominiums and/or apartment rental units, with each household considered an “owner” of the community and have majority-rule voting in community oversight, and share in its equity. A cornerstone of government-subsidized housing with low buy-in costs and rents aimed at assisting low income households.

Source: Danter
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> Cooperative (Co-op)

WORD OF THE DAY

Duplex

A type of multifamily housing unit that is comprised of two adjacent dwellings – either horizontally or vertically attached – and have separate entrances yet share a wall.  The term is also applied to a variety of multifamily properties with three and four units.

Source: Wikipedia
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> Duplex

WORD OF THE DAY

Fair Market Rent (FMR)

The maximum gross rent that can be covered by government subsidies for HUD Section 8 housing in a particular area. This can also be used to determine tax rates in appraisal districts.

Source: Danter
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> Fair Market Rent (FMR)

WORD OF THE DAY

Garden Unit

Type of apartment unit characterized by a cluster of low-rise structures accented with landscaping and/or a garden area. Typically, these types of units are built on or below ground level, with amenities such as pools, playgrounds and clubhouses.

Source: Danter
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> Garden Unit

WORD OF THE DAY

Gross Rent

The total amount of rent paid including the estimated cost of utilities. Also known as a “gross lease”, it is the basic cost a tenant is charged by a landlord (or other third party) to occupy the rental property.

Source: Danter
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> Gross Rent

WORD OF THE DAY

Housing Choice Voucher

As the largest part of the Section 8 program, it is used to assist low-income families and the elderly or disabled pay for housing.  These vouchers are administered at the local level by a city’s Public Housing Authority (PHA) to find suitable housing for tenants. Vouchers pay rent directly to landlords.

Source: Danter
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> Housing Choice Voucher

WORD OF THE DAY

Market-Driven Rent

Using regression analysis, rent is determined as comparable to an area’s commercial markets (e.g., the tech industry in San Diego, CA), in which unit rental costs are affected by the current state of a particular market (i.e., the stronger the market, the higher the rents).

Source: Danter
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> Market-Driven Rent

WORD OF THE DAY

Median Rent

Rental prices for unit types in a particular metropolitan area. Exactly half of the units have higher rents and half have lower rents.  Used to calculate fair-market rental prices.

Source: Danter
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> Median Rent

WORD OF THE DAY

Net Absorption

Measure of the total amount of occupied space (in square-footage) less the total vacated space in a rental property (not including sublets, pre-leases or lease renewals) during the applicable rental period.

Source: Danter
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> Net Absorption

WORD OF THE DAY

Net Rent

The amount a tenant will pay to a lessor or landlord in addition to the rent, which also covers some or all property expenses, and is specified within the lease.  Typically used with commercial rental properties, and can be “pro-rated” based on the size of the leased property.  With multifamily rental units, a tenant’s rent is adjusted to reflect utilities and/or amenities paid for by the landlord.

Source: Danter
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> Net Rent

WORD OF THE DAY

Rent Gap

Theory published by Neil Smith in 1979 that measures the difference between the actual and the potential values of a property when considering the “best use” of a site.  It has been used to explain the economic motives behind the gentrification of a particular area, revealing the difference in actual rental incomes versus potential rental incomes.

Source: Danter
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> Rent Gap

WORD OF THE DAY

Replacement Absorption

Metric used to calculate the number of tenants needed to sign leases in order to offset the losses associated with tenants that have either broken or not renewed their leases.

Source: Danter
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> Replacement Absorption

WORD OF THE DAY

Step-Down Lease

Type of lease that provides deceased rental rates for tenants on specific future dates.  Landlords can use this type of lease to avoid losing tenants who would otherwise need to move out due to rising rents.

Source: MoneyGlossary
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> Step-Down Lease

WORD OF THE DAY

Step-Up Lease

Type of lease where rental rates for tenants increase to a predetermined amount on specific future dates.  The property owner risks losing his or her investment, betting against factors such as inflation, taxes, and other incurred costs.

Source: Investopedia
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> Step-Up Lease

WORD OF THE DAY

Townhouse

Type of attached multifamily unit defined as a two- or three-story dwelling that shares a common wall and/or adjacent walls with the other units.

Source: Danter
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> Townhouse

WORD OF THE DAY

Turnover Rate

Metric used to measure a rental property’s efficiency by calculating the number of vacant rental units due to broken or non-renewed leases.  High turnover rates can affect unit as well as surrounding property market prices.

Source: Danter
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> Turnover Rate

WORD OF THE DAY

Unit Type

The classification for residential dwellings.  Includes single-family and multifamily housing, further classified by size (1,2, or 3+ bedrooms) and unit structure type (e.g., apartment, condominium, duplex, townhouse, etc.), and is used to calculate rent.

Source: Danter
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> Unit Type

WORD OF THE DAY

Upper-Quartile Rent

The upper-25% over the median rental prices in a given area over a specified period of time.  For example, a multi-unit rental property has a total of 40 apartments; 10 of these apartments will have higher-than-average rent in comparison to the other 30 units.

Source: Danter
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> Upper-Quartile Rent