Terms every real estate investor should know.

ARV (After-Repair Value)

The estimated market value of a property after all planned improvements are complete. Used to project resale price and calculate deal profitability.

Capital Stack

The structure of financing in a real estate deal — who invested, in what amounts, in what position (senior/subordinate), and in what order they get paid.

Carry Costs

Ongoing expenses during a hold period — property taxes, insurance, utilities, and loan interest — that reduce net profit if the project runs long.

Collateral

The asset pledged to secure a loan. In real estate private lending, the property itself typically serves as collateral.

Cost Segregation

An accounting strategy that accelerates depreciation on investment properties to reduce taxable income. Relevant for equity partners who receive a Schedule K-1.

Deal Summary

A 1–2 page document provided to investors before funding — covering property details, project scope, capital needed, projected return, and legal structure.

Default

Failure to meet the terms of an investment agreement — typically defined as failure to pay on schedule or failure to complete the project. Default provisions are defined in every agreement.

DFW (Dallas–Fort Worth)

The Dallas–Fort Worth metroplex — the fourth-largest metropolitan area in the United States, encompassing Dallas, Fort Worth, and surrounding counties.

Draw Schedule

The schedule by which construction loan funds are disbursed — typically tied to project milestones (land cleared, foundation poured, frame complete, etc.).

Equity Position

An ownership stake in a deal or property. Equity investors participate in profits (and losses) rather than receiving a fixed return.

Exit Strategy

The planned method for returning investor capital and realizing profit — typically a property sale, refinance, or lease-up.

First Lien Position

The highest-priority secured position in a deal — if the property is sold or foreclosed, the first lien holder is paid before any other creditors.

Fix-and-Flip

A strategy where a property is purchased, renovated, and resold — typically within 6–12 months.

Hard Money

Short-term, high-interest financing from institutional lenders (not individuals) — typically used by operators who need fast capital and cannot qualify for bank financing. Different from private money.

IRR (Internal Rate of Return)

An annualized return metric that accounts for the time value of money. Used to compare deals with different timelines and return structures.

LTV (Loan-to-Value)

The ratio of loan amount to property value. A 70% LTV means the loan equals 70% of the property's value. Lower LTV = more equity cushion = lower lender risk.

Mudaraba

An Islamic finance profit-sharing structure where one party provides capital and the other provides management and labor. Returns are profit-shared; losses are absorbed by the capital provider. Referenced for investors familiar with this framework — EXL's equity programs function similarly in structure, without religious framing.

Net Profit

Total proceeds from a deal sale minus all costs (acquisition, renovation, carry, closing, commissions). Profit-share returns are calculated from net profit.

Private Money

Capital provided by individual investors — not banks, not institutional lenders. Terms are negotiated directly between the investor and the operator.

Profit-Share Agreement

A contract specifying how net profits from a real estate project are divided between the operator and the investor.

Promissory Note

A written promise to repay a loan — specifying the principal amount, interest rate, repayment schedule, and collateral. The foundational document in a debt-structured private lending deal.

Regulation D (Reg D)

An SEC exemption that allows private companies to raise capital from investors without registering the securities publicly. Most private real estate deals are structured under Reg D.

SDIRA (Self-Directed IRA)

An individual retirement account that allows the holder to invest in alternative assets — including real estate — rather than only publicly traded stocks and bonds.

Spec Home

A home built by a developer or operator on speculation — meaning without a buyer contracted in advance. The builder assumes the risk of finding a buyer after the home is complete.

Term

The length of time an investment agreement is in effect — typically expressed in months (e.g., "12-month term").

TREC

Texas Real Estate Commission — the state agency that licenses and regulates real estate brokers and agents in Texas.

Underwriting

The process of evaluating a deal's risk and return — reviewing purchase price, renovation costs, ARV, market comps, and contingency to determine whether the deal meets investment criteria.