Glossary
Private Money Loan Glossary
The terms Texas investors run into, in plain English.
- Hard money loan
- A short-term, asset-based loan secured by real estate, underwritten primarily on the property and the deal rather than the borrower’s credit score.
- Private money
- Financing from a private lender (rather than a bank), often used by real estate investors for speed and flexibility.
- ARV (After-Repair Value)
- The estimated value of a property after planned renovations are complete, supported by comparable sales.
- LTV (Loan-to-Value)
- The loan amount as a percentage of the property’s value.
- LTC (Loan-to-Cost)
- The loan amount as a percentage of the total project cost (purchase plus rehab/construction).
- Points
- An origination fee expressed as a percentage of the loan amount. One point equals 1% of the loan.
- Draw
- A release of rehab or construction funds, made as work is completed and inspected.
- Bridge loan
- Short-term financing that bridges a property between transactions, such as acquisition before a refinance or sale.
- Transactional funding
- Very short-term funding for a same-day A-B-C double closing, used by wholesalers with an end buyer in place.
- Double close (A-B-C)
- Two back-to-back closings: the investor buys from the seller (A-B) and immediately resells to the end buyer (B-C).
- Exit strategy
- How the loan will be repaid - typically a sale or a refinance.
- Qualified intermediary (QI)
- A third party that facilitates a 1031 exchange by holding exchange funds and preparing documentation.
- 1031 exchange
- A transaction under IRC §1031 that may defer capital gains tax when investment property is exchanged for like-kind property. Consult your tax advisor.
- Non-owner-occupied
- Property that is not the borrower’s primary residence - i.e., held for investment or business purposes.
- Loan servicing
- Ongoing administration of a loan: collecting payments, accounting, statements, escrow, and reporting.