Investing Terms Glossary

Investing in real estate can be rewarding but, as with any investment there are risks. Below is a list of common words you'll see used throughout our website and the industry. You should get familiar and comfortable with them.

“Be greedy when others are fearful, and fearful when others are greedy. ”
Key Concepts

Real Estate Market Cycles

Real estate markets go through cycles of growth, stability, decline, and recovery. Understanding these cycles can help you make informed investment decisions. Nobody knows exactly when a cycle is starting or stopping, nor how long a cycle will be. These cycles are influenced by factors such as economic conditions, interest rates, and supply and demand dynamics.

While the duration of market cycles can vary, the four stages are:

  1. Expansion - Period of Strong Economic Growth
  2. Peak - Period of Maximum Economic Output
  3. Recession - Two Quarters (or more) of Shrinking Economic Output
  4. Trough - Period of Lowest Economic Output

Real Estate Investment Strategies

There are many ways to make money in real estate. No more the type of deal the underlying fundamentals are important to review and understand. Here are just a few of the ways to make money in real estate investing.

  1. Buy and Hold - Purchase a property and hold onto it for an extended period. Rental income covers expenses, and you benefit from both cash flow and potential appreciation.
  2. Fix and flip - Buy properties in need of repair, renovate them, and sell at a higher price. This strategy can be profitable but requires a keen eye for value and rehab skills.
  3. Wholesaling - Find undervalued properties, put them under contract, and then assign the contract to another buyer for a fee. It's a quick way to make money without owning the property.
  4. BRRRR - Buy, Repair, Rent, Refinance, Repeat. A combination of fix and flip with buy and hold. Find a distressed property, repair it, refinance to get the capital output and repeat.
  5. Short Term Rentals (STR) - Generate income from day to day or month to month tenants. Typically done through AirBNB, VRBO, or something similar.
  6. Development - Purchasing land or existing property, demolishing or clearing land if necessary, and constructing new buildings.

Real Estate Types

Real estate is a diverse sector with many asset types it covers. Just like pizza everyone has a favourite flavour, here are a few of the ones you can get:

  1. Residential Real Estate - Properties like single-family homes, multi family homes with less than 4 units, or condos. Residential investing often involves renting to individuals or families.
  2. Commercial Real Estate - Includes retail properties, office spaces, industrial buildings, and hotels. Commercial leases tend to have longer terms and can offer higher returns for greater risk.
  3. Industrial Real Estate - Warehouses, distribution centers, and manufacturing facilities. E-commerce growth has boosted demand for industrial properties.
  4. Retail Real Estate - Shopping malls, strip malls, and standalone stores. Retail investing can be impacted by shifts in consumer behavior and online shopping trends.
  5. Office Real Estate - Office buildings where businesses rent space. The trend toward remote work has led to evolving dynamics in the office real estate market.
  6. Multifamily Real Estate - Apartment complexes and other properties with multiple rental units. This can provide consistent cash flow and risk diversification.
  7. Vacation Rentals - Renting out properties on platforms like Airbnb for short-term stays. This can yield higher rental income but requires active management.
  8. Mixed-Use Real Estate - Properties that combine different types of real estate, like retail and residential. They offer diversification and potential for higher value.
General Terms
  • Amortization — Amortization is like spreading out your loan payments in a way that's manageable, so you don't end up in a financial knot. It's typically measured in years.
  • Appreciation — It's like watching a flower bloom, but with money. Appreciation is when your investments increase in value over time, turning your financial garden into a colorful paradise.
  • Asset Allocation — Picture this: you're at a buffet of investments, and you need to choose where to put your money. Asset allocation is like creating a balanced plate of financial goodies. Remember, no one ever succeeded by going all-in on just one dish.
  • Asset Management — Ever seen someone juggle investments? Asset management is like that – professionals juggle your investments, aiming to make them grow and thrive.
  • B
  • Balanced Fund — Think of a balanced fund as a mixtape of investments. It's a blend of stocks, bonds, and maybe even some jazzier assets, all harmonizing for your financial well-being.
  • Bankruptcy — This is like waving a white flag in the financial battlefield. Bankruptcy happens when you can't repay your debts – it's a tough situation, but sometimes it's a fresh start.
  • Bear Market — Imagine the stock market taking a long nap. That's a bear market – when prices drop and everyone's a bit grumpy. But remember, even bears wake up eventually, and so does the market.
  • Blue Chip Stocks — These are like the A-list celebrities of the stock world. Just like everyone wants to see the latest blockbuster with a famous actor, investors flock to blue-chip stocks because they're well-known, stable, and usually packed with potential. They typically have lower but more stable returns than other stocks.
  • Bond — Think of bonds like lending your money to a friend who promises to pay it back later with a little extra (interest) as a thank-you note. The government and big companies are often those “friends”. Depending on the rating bonds are typically considered safer than stocks.
  • Bull Market — This is when the market is charging ahead with enthusiasm. Picture a stampede of bullish optimism – people are confident, prices are rising, and everyone's got their dancing shoes on.
  • C
  • Capital Gains — Ah, the sweet sound of profit! Capital gains are what you earn when you sell an investment for more than you bought it for. It's like buying a vintage comic book for a dollar and selling it for a thousand. Ka-ching! Typically capital gains are taxed more favourably than other income making it the whole grail of investing.
  • Capital Loss — Remember that comic book you bought? Well, if you sell it for less than what you paid, that's a capital loss. Don't worry, even superheroes have their off days. You get to write off the lost against future capital gains.
  • Cash Flow — This is how much money your investment makes after paying all costs every month. This goes towards financing dividend payments while you're relaxing on the beach.
  • Cash Reserve — Think of a cash reserve as your financial emergency cushion. It's like a cozy rainy day fund that protects you from unexpected financial storms.
  • Commercial Property — This covers office spaces, multi family (apartment buildings), warehouses/industrial, as well as retail.
  • Compound Interest — Time to call in the math magic! Compound interest is interest on top of interest. It's like planting a money tree and watching it grow faster and taller each year. The longer it grows, the more it branches out.
  • Condominium — Picture a condo as your own little kingdom in a larger castle. You own your unit, but everyone pitches in for the upkeep of the grand halls, umm, common areas.
  • Credit Score — This is like your financial report card. The better your credit score, the more likely banks will lend you money. It's like telling them, "Hey, I'm trustworthy, and I always return my library books on time."
  • D
  • Debt Consolidation — Imagine all your debts having a group hug and becoming best friends. Debt consolidation is like merging your debts into one tidy payment plan. It's financial decluttering.
  • Diversification — Diversification is like having a buffet of investments. Just as you wouldn't eat only one dish at a buffet (unless it's tacos), you shouldn't put all your money into one investment. Diversification can also extend to investing in other asset classes like stocks and bonds.
  • Dividend — Think of dividends as little money gifts from companies. When you own shares, some companies say "Thanks for believing in us!" by sharing their profits with you. This is what you receive from the monthly rent payments when a project pays you out as a partner.
  • Down Payment — Ah, the upfront cash you need to secure a real estate deal. It's like that ticket price you pay before entering a fun amusement park of homeownership.
  • E
  • ETF (Exchange-Traded Fund) — Imagine a basket full of different investments – that's an ETF. It's like buying a mixtape of songs, except these "songs" are stocks, bonds, or other assets. ETFs are one of the best investment vehicles for the average person.
  • Emergency Fund — This is your financial safety net, your 'oops-I-spilled-coffee-on-my-laptop' fund. It's there to soften the blow when life throws a curveball – and trust me, life has a wicked fastball.
  • Equity — Equity is like a delicious pie you bake. Your home's value minus what you owe is your equity pie – and unlike your oven, it doesn't have an 'out of pies' sign.
  • Estate Planning — Estate planning is like sending a letter to your future self. It's deciding who gets your stuff when you're not around – and no, it's not about picking favorites among your pets.
  • F
  • Financial Advisor — Need a money guru? A financial advisor is like a personal trainer for your wallet. They guide you on investments, retirement plans, and financial dreams.
  • Financial Literacy — Being financially literate is like being the Sherlock Holmes of money. It's about understanding investments, taxes, and budgets – solving the mystery of financial success.
  • Fixed Income — Fixed income is like a comfy couch – it's steady and doesn't move much. Bonds are the cushions of your investment portfolio, offering regular interest payments.
  • Fixed-Rate Mortgage — This is like setting a solid monthly rent for your own home. Your payment stays the same for the duration of the mortgage. This is in contrast to Variable-Rate mortgages.
  • Foreign Exchange (Forex) — Exchanging one currency for another.
  • Foreign Investment — Think of foreign investment as collecting souvenirs from other economies. Investing internationally is like adding exotic spices to your financial recipe.
  • G
  • GIC (Guaranteed Investment Certificate) — One of the safest investment vehicles, you loan money to the government and they pay it back with interest.
  • General Partner — Meet the real estate maestro! The general partner is like the conductor of an orchestra, making sure all the instruments (investments) play in harmony. They're the decision-maker, risk-taker, and the one who stays up late studying the financial sheet music. Just remember, with great power comes great real estate responsibility. They carry all the legal liability and are liable for any debts of the partnership.
  • H
  • Home Equity — Imagine your home turning into a money tree. Home equity is the part of your home's value that you actually own.
  • Home Inspection — A home inspection is like getting a mechanic to check under the hood before buying a car. Except in this case, the car is your potential home, and the engine is...well, everything.
  • I
  • Inflation — Watch out, rising prices ahead! Inflation is like that sneaky friend who makes your ice cream more expensive every year. Your money buys less, and your dollar bill sheds a tear.
  • Inheritance — Inheritance is like an unexpected present from a relative who really liked you. It's what you receive when someone leaves behind their assets after they pass away.
  • Interest — Interest is like the seasoning on your financial meal. When you borrow money, interest is the extra you pay – but when you save, it's the extra you earn. Just don't over-salt.
  • Interest Rate — Ah, the cost of borrowing money. It's like the fee you pay for renting cash from the bank. The lower, the better – it means cheaper loans and mortgages.
  • Internal Rate of Return — IRR for short. This is a measure of how much money your investment is expected to make a year.
  • Investment Portfolio — Think of this as your financial art gallery. It's a collection of all your investments – stocks, bonds, real estate – creating a colorful masterpiece of potential returns. Balance is the key.
  • J
  • Joint Account — A joint account is like a financial BFF arrangement. It's an account shared with someone else – your partner, your sibling, or even your bestie who never repays their pizza debt.
  • Joint Tenancy / Co-Ownership — You and a buddy owning property together. It's like having a best friend in the real estate world. Just remember, real estate friendships need extra trust and a sprinkle of legal paperwork.
  • L
  • Leverage — Imagine borrowing a magnifying glass to look for hidden treasure. That's leverage – using borrowed money to amplify your investments. Just remember, with great leverage comes great responsibility. Leverage increases both your upside and downside risks, so use it wisely.
  • Leverage Ratio — Leverage ratio is like using a magic potion to make your investment stronger. It's the comparison between your borrowed funds and your own – the recipe for financial wizardry.
  • Limited Partner — Imagine you're part of a real estate adventure but without the stress of calling all the shots. As a limited partner, you're like the co-pilot of a plane – you're on the journey, but the captain (general partner) handles the flight plan. It's like having a backstage pass to the real estate show without worrying about the stage setup. Limited partners are not liable for any debts of the partnership.
  • Line of Credit — A line of credit is like a credit card's big brother. It's a pre-approved loan you can dip into whenever you need – just remember, it's not Monopoly money.
  • Liquidity — Liquidity is like how fast you can turn your stuff into cash. A popsicle is highly liquid (it melts fast), while a house takes longer (unless you're in a fairy tale).
  • M
  • Market Capitalization — This is like measuring the size of a company's ego. Well, not exactly, but it's the total value of a company's outstanding shares in the stock market.
  • Mortgage Broker — A mortgage broker is like a matchmaker for home loans. They connect you with lenders and help you find 'the one' – the perfect mortgage deal, that is.
  • Mutual Fund — A mutual fund is managed by professionals who pool your money with others to buy a mix of stocks, bonds, or other assets.
  • N
  • Net Income — Net income is like your financial paycheck. It's the money you bring in after taxes and deductions – the part that gives you those 'treat yourself' vibes.
  • Net Worth — Time for a financial selfie! Net worth is like a snapshot of your financial health. Add up all your assets and subtract your debts – that's your net worth.
  • P
  • P/E Ratio (Price-to-Earnings Ratio) — The P/E ratio is like a popularity contest for stocks. It compares a company's stock price to its earnings – kind of like comparing how much you spend on snacks to how much you make.
  • Passive Income — Passive income is like money that falls into your lap while you're sipping a fancy drink on the beach. It's the sweet cashflow generated by investments you've set up.
  • Pre-Approval — Getting pre-approved for a mortgage is like having a golden ticket to the real estate factory. It's a lender's promise that you're financially ready to buy a home.
  • Principal — The starting sum of your investment. It's like the main ingredient of a recipe – the rest of the investment stew gets cooked around it. Your profit is your total return minus the principal.
  • Property Management — Property management is like having a personal assistant for your real estate. They handle tenant stuff, repairs, and make sure your property kingdom stays in tiptop shape.
  • Property Tax — It's like your home's rent to the government. You pay property tax to fund local services like schools, parks, and roads. You're practically a hero of your neighborhood!
  • R
  • REIT (Real Estate Investment Trust) — The old school way of doing real estate investing. You invest in a fund managed by professionals who go buy, operate, and sell properties on your behalf.
  • Rate of Return — Imagine your money doing the cha-cha dance of growth. Rate of return measures how fast your investments are dancing their way into more money.
  • Real Estate Investment — Real estate investment is like playing Monopoly, but for real money. You buy properties, collect rent, and hope to strike gold in the form of appreciation.
  • Registered Education Savings Plan (RESP) — An RESP is like a piggy bank with a scholarship. It's a Canadian savings plan to help parents save for their kids' education. Because hey, future scholars deserve it!
  • Retirement Savings Plan (RRSP) — Picture your money in a time capsule that's only opened when you're retired and ready to enjoy it. RRSPs give you tax benefits for saving up for those golden years.
  • Risk Management — Risk management is like being the goalie of your financial soccer team. It's all about blocking potential threats to your investments and keeping your financial goalpost secure.
  • Risk Tolerance — How adventurous are you feeling with your money? Risk tolerance is like deciding whether you want to try skydiving or stick to a cozy game of board Monopoly. Typically higher risk is correlated with higher potential returns. It's all about finding the right balance of risk-reward.
  • S
  • Short Selling — Short selling is like the opposite of 'buy low, sell high'. You borrow shares, sell them at a high price, then hope the price drops so you can buy them back cheaper. It's like betting against the stock market.
  • Stock Exchange — Imagine a marketplace where you trade slices of companies. That's the stock exchange. It's like the mall for investors, where stocks are the hot merchandise.
  • T
  • Tax Deduction — Ah, the sweet relief of paying less tax. Tax deductions are like finding hidden treasure – they lower your taxable income, saving you money. Real estate offers many ways to accrue deductions and lower your payable tax.
  • Tax-Free Savings Account (TFSA) — A TFSA is like a tax-free playground for your investments. You contribute after-tax money, and all the growth and withdrawals are, you guessed it, tax-free.
  • Term Deposit — A term deposit is like a money cocoon. You give your money to the bank for a fixed term, and it emerges later as a beautiful butterfly with interest wings.
  • Treasury Bills (T-Bills) — T-Bills are the US equivalent of Canadian GICs.
  • U
  • Underwriting — Underwriting is like a financial health checkup. Lenders do this before approving your mortgage, making sure you're a reliable borrower and won't drop the financial ball.
  • V
  • Vacancy Rate — Vacancy rate is like a real estate mood ring. It tells you how many rental properties are feeling lonely and unoccupied – a high rate means your property might need a little more TLC.
  • Variable-Rate Mortgage — Your payment is typically the same month to month (unless the amortization exceeds the limit), but the amount going to principal vs interest changes depending on the market mortgage rate. This is in contrast to Fixed-Rate mortgages.
  • Volatility — Volatility is like a roller coaster ride for your investments. Some days you're high-fiving the sky, and others you're gripping your seat, screaming 'Let me off!'
  • W
  • Wealth Accumulation — Wealth accumulation is like watching your snowball grow. It's the gradual process of saving, investing, and watching your financial snowball turn into a snowy mountain.
  • Wealth Management — Think of this as hiring a financial butler. Wealth management professionals help you grow, protect, and enjoy your money – kind of like your money's personal trainer. Typically wealth management is for high net worth individuals.
  • Will — A will is like a letter from your future self to your loved ones. It outlines how you want your belongings and money to be distributed when you're no longer around to enjoy them.
  • Y
  • Yield — Picture your investment as a tree, and yield is the fruit it bears. Yield measures how much income you're getting from your investment, and whether those fruits are sweet or sour.
  • Z
  • Zero-Coupon Bond — A zero-coupon bond is like a 'buy now, save for later' deal. You buy the bond at a discount, and when it matures, it turns into a full-priced investment cake.
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