Property Management Glossary

  • Accredited Residential Manager - Accredited Residential Manager (ARM) is a professional designation given by the Institute of Real Estate Management (IREM) to individuals who have demonstrated proficiency and expertise in managing residential real estate properties. Put simply, earning the title of an Accredited Residential Manager (ARM) showcases a comprehensive understanding of property management principles, tenant relations, financial management, and […]
  • Affordable Housing - Affordable housing refers to residential units that are priced reasonably relative to the income levels of individuals or families in a specific area. Affordable housing is typically for individuals or families below the median income as rated by the national government or a local government by a recognized housing affordability index. Put simply, affordable housing […]
  • Amortization - Amortization refers to the gradual repayment of a debt, usually a loan or a mortgage, through a series of regular payments over time. Each payment consists of both principal (the original amount borrowed) and interest (the cost of borrowing). As payments are made, the outstanding balance decreases. Amortization schedules typically show the distribution of each […]
  • Annual Depreciation - Annual Depreciation refers to the gradual decrease in the value of a property over time due to wear, tear, obsolescence, and aging. Understanding annual depreciation is a crucial aspect of financial planning and accounting for property owners and managers. Typically, depreciation is spread out over the useful life of the property and is deducted as […]
  • Appraised Value - Appraised Value refers to the estimated monetary worth of a property, determined by a qualified appraiser. This appraisal is a crucial step in various real estate transactions, including buying, selling, financing, or refinancing a property. The appraised value takes into account factors such as the property’s location, size, condition, comparable sales in the area, and […]
  • Average Arrears - Average Arrears refers to the typical amount of unpaid rent or fees owed by tenants across a property portfolio. It is a crucial financial metric that property managers monitor closely to assess the financial health of their rental properties. By calculating the average arrears, property managers can identify trends and patterns in late payments, allowing […]
  • Average Days-to-Lease - Average Days-to-Lease gauges the efficiency of a rental property’s leasing process and is yet another pivotal metric when assessing the performance of a property management firm.  Average Days-to-Lease quantifies the average time, often in days, that a property remains vacant before a new tenant signs a lease. Put simply, a shorter average indicates robust marketing, […]
  • Average Maintenance Cost per Property - Average Maintenance Cost per Property refers to the typical expenditure required to upkeep a specific property over a designated period, usually annually. This cost encompasses various expenses, including routine maintenance tasks like landscaping, cleaning, and minor repairs, as well as unexpected repairs or renovations. It can vary significantly based on property type, location, and its […]
  • Building Class - A Building Class is a categorization system used in real estate to classify commercial properties based on their quality, location, and overall desirability. It helps investors, tenants, and property managers to quickly assess a building’s characteristics and market appeal. Generally, Class A buildings are the highest quality, often found in prime locations with modern amenities […]
  • Building Safety Manager - A Building Safety Manager is responsible for upholding safety standards within a building. Building safety managers oversee emergency plans, fire safety measures, security protocols, and tenant well-being. Their role involves compliance with regulations, conducting regular safety training, maintaining equipment, and addressing potential hazards. By ensuring a secure environment, Building Safety Managers mitigate risks, facilitate emergency […]
  • Cap Rate - Capitalization Rate, also known as Cap Rate, is a fundamental financial metric used to assess the potential return on investment for a property. Cap Rate calculated by dividing the property’s net operating income (NOI) by its current market value. Put simply, the Cap Rate signifies the rate of return an investor can expect from a […]
  • Capital Improvement - Capital improvements refer to significant investments made in a property to enhance its value, functionality, or appearance. These improvements involve substantial spending and focus on long-term benefits. Examples of capital improvements include, but are not limited to, renovating interiors, upgrading infrastructure, adding amenities, or improving overall energy efficiency. Put simply, capital improvements aim to attract […]
  • Cash-on-Cash Return - Cash-on-Cash Return (CoC) is a financial metric used in real estate investment to evaluate the profitability of an investment property. It measures the annual pre-tax cash flow generated by an investment property as a percentage of the initial cash investment made by the investor. To calculate CoC, you divide the property’s annual net operating income […]
  • Certificate of Occupancy - A Certificate of Occupancy (CO) is an official document issued by local government authorities to verify that a building or property complies with zoning, building codes, and other regulations, and is safe for occupancy. It signifies that the property meets specific standards for health, safety, and habitability. Before tenants can move in or a property […]
  • Common Area Maintenance - Common Area Maintenance (CAM) refers to the costs associated with maintaining and managing shared or common spaces within a multi-unit property, such as shopping centers, office buildings, or apartment complexes. These common areas typically include hallways, parking lots, lobbies, elevators, landscaping, security, and other communal facilities. Property owners or landlords charge tenants a proportionate share […]
  • Condo vs. Apartment - Condos and apartments are both types of residential housing, however, they differ in ownership and rental structure. For instance, apartments are typically units within a rental complex owned by a single landlord or property management company, and tenants, in turn, rent these units. Condos, on the other hand, are individually owned units within a larger […]
  • Condo vs. Townhouse - Condos and townhouses are forms of residential housing, however, with a few key differences. For example, condos are individual units within a larger complex, typically owned by residents who share ownership of common areas and pay association fees for maintenance. Townhouses, by contrast, are usually multi-level homes, often with shared walls, and are individually owned. […]
  • Conversion Rate - Conversion Rate refers to the percentage of prospective tenants who ultimately become actual tenants by signing a lease agreement or renting a property. Put simply, This metric is essential for assessing the efficiency of the property management team’s leasing efforts. A higher conversion rate signifies that a greater proportion of potential tenants have been successfully […]
  • Expense Management - Expense Management involves the organized control and oversight of all financial outflows associated with owning and maintaining a property or real estate portfolio. This includes tasks such as budgeting, tracking, and optimizing various property-related costs, including fixed expenses (e.g., property taxes, insurance, mortgage payments) and variable expenses (e.g., utilities, maintenance, repairs). Effective expense management ensures […]
  • Expense Ratio - Expense Ratio refers to a financial metric that assesses the efficiency of managing and operating a rental property. Put simply, it calculates the proportion of a property’s total operating expenses relative to its total rental income. Typically expressed as a percentage, a lower expense ratio indicates more efficient cost management. This metric ultimately helps property […]
  • Fair Market Value (FMV) - Fair Market Value (FMV) refers to the objective and unbiased assessment of a property’s worth in the current real estate market conditions. FMV is crucial for property managers when making decisions related to leasing, buying, selling, or valuing properties within their portfolios. It takes into account factors such as the property’s location, size, condition, comparable […]
  • Fixed Expense - A Fixed Expense refers to a recurring cost that remains constant and does not vary based on factors like property occupancy or usage. These expenses are essential for maintaining the property and ensuring its ongoing operation, regardless of whether it is vacant or occupied. Fixed expenses typically include obligations such as property taxes, insurance premiums, […]
  • Floor Area Ratio - Floor Area Ratio (FAR), also known as Floor Space Index (FSI) or Floor Space Ratio (FSR), is a zoning regulation and urban planning tool used to control the density and intensity of development in a specific area. FAR is a numerical value that represents the ratio of a building’s total floor area to the size […]
  • Full Repairing and Insuring Lease - A Full Repairing and Insuring (FRI) Lease is a type of commercial lease agreement often used in real estate. In an FRI lease, the tenant assumes significant responsibilities and liabilities for the leased property. Specifically, the tenant is obligated to not only pay rent but also to cover all costs associated with the maintenance, repair, […]
  • Gross Lease - A gross lease is a type of lease agreement commonly used in real estate, particularly in commercial and residential settings. In a gross lease, the tenant pays a fixed rent amount that covers not only the base rent but also most, if not all, of the property’s operating expenses. These expenses typically include property taxes, […]
  • Gross Rent - Gross Rent refers to the total rental income generated from a property before deducting any expenses or costs. It includes the base rent paid by tenants along with any additional fees, such as utilities or parking charges. Gross Rent, however, doesn’t account for operating expenses like maintenance, property management fees, or property taxes. Put simply, […]
  • Investment Property - An investment property is real estate purchased with the primary intention of generating income and potentially appreciating in value over time. An investment property is not intended for personal use but rather for renting out or reselling. Investors aim to generate rental income through tenants while also benefiting from property value appreciation. Investment properties can […]
  • Lease Agreement - A lease agreement is a legally binding contract between a landlord and a tenant that outlines the terms and conditions under which the tenant can rent and occupy a property. Lease agreements specify details such as the rental duration, rent amount, payment schedule, security deposit, responsibilities for maintenance and repairs, rules for property use, and […]
  • Lease Option - A lease option, also known as a rent-to-own agreement, is a real estate arrangement where a tenant leases a property from a landlord with the option to purchase the property at a predetermined price within a specified time frame. During the lease period, the tenant pays rent as well as an additional amount that can […]
  • Market Rate - Market rate refers to the prevailing rental price for a specific type of property in a particular location at a given time. It is the rate at which landlords can reasonably expect to rent out their properties based on current market conditions. Market rate is influenced by factors such as the property’s location, size, condition, […]
  • Market Rent - Market rent refers to the prevailing rental rate that a property can command in the current real estate market. Put simply, market rent is the amount that tenants are willing to pay for similar properties in the same location, considering factors such as property type, size, condition, amenities, and local supply and demand dynamics. Property […]
  • Modified Gross Lease - A Modified Gross Lease is a type of lease agreement that combines elements of both the Gross Lease and Net Lease structures. In a Modified Gross Lease, the tenant and landlord share the responsibilities for paying certain property-related expenses. Typically, the tenant pays a base rent that covers the property’s operating expenses, such as property […]
  • Mortgage - A mortgage is a legal agreement where a lender provides financing to a property buyer to purchase real estate. The buyer, referred to as the mortgagor, borrows funds to acquire the property while agreeing to repay the loan with interest over a set period. The property itself serves as collateral for the loan, allowing the […]
  • Multifamily Home - A multifamily home, also commonly referred to as a multifamily dwelling or MDU, can be a residential or commercial building designed to accommodate multiple separate living units within a single structure. MDUs can be apartments, condos, townhouses, or any configuration that allows multiple households to reside independently while sharing common spaces. Multifamily homes offer various […]
  • Net Operating Income - Net Operating Income (NOI) is commonly used to assess the profitability of a particular property. NOI represents the total income generated by a property from its operations, minus operating expenses, however, excludes mortgage payments and income taxes. Net Operating Income provides a clear overview of a property’s profitability and ability to generate income before considering […]
  • Net Potential Rent (NPR) - Net Potential Rent (NPR) represents the maximum possible rental income a property could generate under full occupancy and optimal conditions. In other words, NPR considers the total potential rent from all units without accounting for any vacancies or losses due to non-payment. Net Potential Rent is a theoretical measure used for evaluating a property’s income-generating […]
  • Net Promoter Score (NPS) - The Net Promoter Score (NPS) is a valuable tool for assessing tenant satisfaction and gauging their likelihood to recommend a rental property or management services. Property managers typically ask tenants the following question: “On a scale of 0 to 10, how likely are you to recommend our property management services or this rental property to […]
  • Occupancy Rates - Occupancy rate refers to the ratio of rented or leased units to the total number of units within a property or multifamily building. Occupancy rate is a vital metric for property owners and managers to gauge the utilization and profitability of their real estate investments. Put simply, a higher occupancy rate indicates strong demand and […]
  • Operating Budget - An operating budget is a financial plan that outlines the anticipated income and expenses associated with the operation and maintenance of a real estate property over a specific period, typically a fiscal year. This budget serves as a comprehensive financial roadmap, detailing items such as rental income, utility costs, property taxes, insurance, maintenance, repairs, and […]
  • Percentage Rent - Percentage rent is a commercial lease arrangement where, in addition to a base rent, the tenant agrees to pay a percentage of their gross sales revenue to the landlord. This leasing structure is commonly used in retail and shopping center leases. The percentage is typically a small fraction of the tenant’s monthly or annual sales […]
  • Property Appreciation - Property appreciation refers to the increase in the value of a property over time. It is a fundamental concept in real estate investment, where properties can appreciate in value due to various factors such as market demand, location improvements, economic growth, and inflation. For property managers, understanding and strategically managing these factors can enhance the […]
  • Property Assessment - A property assessment is an evaluation conducted by local government authorities and banks to determine the value of a property for taxation purposes. Property assessments typically involve evaluating the property’s market value, which includes its land and any structures on it, to establish its worth. Property assessments ultimately influence property taxes, as higher assessed values […]
  • Property Inspection - A property inspection is a thorough assessment of a real estate property’s physical condition, typically performed by a certified inspector or professional. The inspection first involves examining various aspects of the property, including its structural integrity, electrical systems, plumbing, HVAC systems, roofing, insulation, and more. The purpose of a property inspection is to identify any […]
  • Property Insurance - Property insurance is a financial protection that covers the potential losses and damages to real estate properties. Put simply, property insurance safeguards property owners against risks such as fire, theft, vandalism, natural disasters, and liability claims. In exchange for premiums, insurance policies offer coverage for repairs, replacements, or financial compensation for covered perils. Property insurance […]
  • Property Maintenance - Property maintenance refers to the ongoing care and upkeep of a real estate asset to ensure it remains safe, functional, and aesthetically pleasing. This encompasses a wide range of tasks, including routine inspections, repairs, landscaping, cleaning, and addressing tenant concerns. Effective property maintenance is essential for preserving property value, attracting and retaining tenants, and complying […]
  • Property Management Agreement - A property management agreement is a legally binding contract that outlines the terms and responsibilities between a property owner and a property management company. Put simply, this agreement defines the scope of services the property manager will provide, such as tenant sourcing, rent collection, maintenance, and more. Property management agreements typically outline compensation, including management […]
  • Property Management System - Property Management System is a digital tool designed to streamline and automate various tasks related to property management. Put simply, property management systems assist property managers, landlords, and real estate professionals in efficiently managing rental properties, leases, tenants, maintenance, finances, and more. The software typically comes equipped with features such as rent collection, lease tracking, […]
  • Property Manager - A property manager is an individual or company responsible for overseeing the day-to-day operations and maintenance of real estate properties on behalf of property owners. Their roles include finding and screening tenants, handling lease agreements, collecting rent, addressing maintenance and repair needs, and ensuring legal and regulatory compliance. In short, property managers act as intermediaries […]
  • Property Portfolio - A property portfolio refers to a collection of real estate assets owned by an individual, organization, or investor. In short, property portfolios encompass multiple properties, which could include residential, commercial, or industrial real estate. The portfolio serves as a diversified investment strategy, spreading risk across various properties and locations. Property portfolios allow for potential income […]
  • Rent Control - Rent control refers to government-imposed regulations on the amount landlords can charge for rent and the rate at which they can increase rents on residential properties. These regulations are typically implemented in an effort to protect tenants from excessive rent hikes and ensure affordable housing options in high-demand urban areas. Rent control often establishes a […]
  • Rent Guarantee Insurance - Rent guarantee insurance, also known as rent default insurance, is a type of policy that provides landlords with financial protection in case tenants fail to pay their rent. Put simply, if a tenant stops paying rent due to financial difficulties or other reasons, the insurance policy covers the lost rental income for a specified period. […]
  • Rent Roll - A rent roll is a document used in real estate management that provides a detailed summary of rental properties within a portfolio. Put simply, a rent roll outlines essential information for each property, such as rental income, lease terms, tenant details, and vacancy status. Rent rolls assist property owners, investors, and managers in assessing the […]
  • Rent-Ready Costs - Rent-ready costs refer to the expenses incurred to prepare a rental property for new tenants. These costs cover necessary repairs, maintenance, and cosmetic improvements required to make the property suitable for occupancy. Examples of rent-ready costs include painting, cleaning, fixing appliances, repairing damages, and ensuring that plumbing, electrical, and HVAC systems are in working order. […]
  • Rental Insurance - Rental insurance, often referred to as renters insurance, is a type of insurance policy designed to protect individuals who are renting a residential property. It offers coverage for personal belongings against events like theft, fire, vandalism, and certain natural disasters. Additionally, renters insurance includes liability coverage, which protects the policyholder from legal and financial responsibilities […]
  • Rental Market Analysis - Rental market analysis is a comprehensive assessment of the dynamics, trends, and conditions within a specific rental property market. It involves gathering and analyzing data on factors such as rental rates, vacancy rates, supply and demand, local economic indicators, and demographic trends. This analysis ultimately helps landlords, property managers, and investors make informed decisions about […]
  • Rental Property - Put simply, a rental property is a real estate asset that is owned by an individual or entity and is made available for lease or rent to tenants. Rental properties can include residential properties such as apartments, houses, and condominiums, as well as commercial properties, including office spaces, retail shops, and industrial units. Rental properties […]
  • Rental Rate - Rental rate refers to the amount of money a landlord or property owner charges a tenant in exchange for the use and occupancy of a residential or commercial property. It is typically expressed as a monthly amount, although it can be quoted on an annual or other basis. The rental rate is determined by various […]
  • Revenue Growth - Revenue growth refers to the increase in income generated from rental properties and real estate holdings over a specific period. This growth typically results from various factors, such as raising rental rates, reducing vacancies, acquiring new properties, or implementing efficient management practices. Put simply, property managers strive for revenue growth as it directly impacts property […]
  • Single-Family House - A Single-Family House (SFH) is a standalone residential structure designed to accommodate a single household or family unit. It is a type of housing that consists of a single dwelling unit, typically containing living spaces, bedrooms, bathrooms, a kitchen, and possibly a yard or outdoor area. Single-family houses are distinct from multi-family properties like apartment […]
  • Student Housing - Student housing refers to residential accommodations specifically designed and tailored to meet the needs of college or university students. These housing options are often located in close proximity to educational institutions to provide convenience for students. Student housing can take various forms, including on-campus dormitories, off-campus apartments, or purpose-built student housing complexes. These accommodations are […]
  • Sublease - A sublease refers to a legal arrangement where a tenant, who is the original leaseholder of a rental property, rents out all or a portion of the property to another individual or subtenant. In this arrangement, the subtenant pays rent to the original tenant, who, in turn, continues to be responsible for paying rent to […]
  • Subletting - Subletting is a rental arrangement in which a tenant, who is already leasing a property from a landlord, rents part or all of the property to another individual, known as the subtenant. The original tenant essentially becomes a “sublandlord” in this scenario. Subletting typically requires the landlord’s consent and often involves a separate sublease agreement […]
  • Tenant Improvement - Tenant improvement refers to the customization or renovation work undertaken by a commercial or residential tenant to adapt a leased space to their specific needs and preferences. Typically negotiated in a lease agreement, these improvements can include interior modifications like partition walls, flooring, lighting, and HVAC upgrades. The cost and extent of tenant improvements can […]
  • Tenant Retention - Tenant retention is a property management strategy aimed at keeping existing tenants in a rental property or commercial space for an extended period. Put simply, tenant retention involves various efforts and incentives to encourage tenants to renew their leases rather than seeking alternative accommodations. Landlords and property managers may offer benefits such as lease extensions, […]
  • Tenant Satisfaction - Tenant satisfaction is a critical metric indicating how well the property meets the needs and expectations of its occupants. Put simply, it encompasses various facets of their experience, including the condition of the property, responsiveness to maintenance requests, clarity of lease terms, and the overall quality of their stay or occupancy. Achieving high tenant satisfaction […]
  • Tenant Screening - Tenant screening is a thorough evaluation process that landlords and property managers use to assess prospective tenants before renting out a property. It involves reviewing applicants’ financial, rental, and criminal histories to determine their suitability as tenants. Key elements of tenant screening typically include credit checks to assess financial responsibility, rental history verification to check […]
  • Triple Net Lease - A Triple Net Lease (NNN lease) is a commercial real estate lease arrangement in which the tenant assumes responsibility for paying not only the base rent but also all operating expenses associated with the property. These expenses typically include property taxes, insurance premiums, and maintenance costs. In a Triple Net Lease, the tenant essentially shoulders […]
  • Turnkey Property - A turnkey property refers to a rental property that is ready for immediate use or occupancy without the need for significant repairs, renovations, or additional work. Put simply, turnkey properties are typically fully furnished, well-maintained, and often managed by a property management company. Turnkey properties are popular among investors seeking a hassle-free, passive income stream, […]
  • Turnover Rate - Turnover rate refers to the frequency at which rental units within a property become vacant and are subsequently occupied by new tenants. It’s a critical metric for property owners and managers to track as it directly impacts financial performance. A high turnover rate can be costly, involving expenses like advertising, cleaning, and potential property upgrades […]
  • Vacancy Loss - Vacancy loss refers to the financial impact of unoccupied rental units or commercial spaces within a property. It represents the income that property owners or landlords miss out on when units are vacant and generating no rental revenue. Vacancy loss includes not only the absence of rent but also associated costs like advertising, maintenance, and […]
  • Vacancy Rate - Vacancy rate represents the percentage of unoccupied or vacant rental units within a specific property. It is calculated by dividing the number of vacant units by the total number of available units and expressing the result as a percentage. A high vacancy rate indicates a surplus of available properties and potential financial strain on landlords, […]