Glossary

Multifamily Terms, Defined

Plain-English definitions of the terms apartment owners and investors run into most — with links to the guides and calculators that go deeper.

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1031 Exchange: A tax-deferral strategy under Section 1031 of the Internal Revenue Code: sell investment real estate and reinvest in like-kind property, identifying replacements within 45 days and closing within 180 days. Learn more →

AB 1482: California’s Tenant Protection Act: a statewide annual rent cap and just-cause eviction rules for many residential buildings more than 15 years old. Learn more →
Accredited Investor: An investor who meets SEC income, net worth, or professional-credential tests and may participate in certain private offerings. Learn more →

Bonus Depreciation: A federal provision allowing an immediate deduction for a percentage of qualifying short-life property in the year it is placed in service. Learn more →

Cap Rate: Capitalization rate: a property’s net operating income divided by its value or price. It expresses the unlevered annual yield a buyer earns at a given price — a lower cap rate means a higher price for the same income. Learn more →
Capital Expenditures (CapEx): Spending on major replacements and improvements such as roofs, HVAC systems, or unit renovations. CapEx is not an operating expense and is excluded from NOI.
Cash-on-Cash Return: Annual pre-tax cash flow after debt service divided by the total cash invested (down payment, closing costs, and upfront capital). It measures the cash yield on the equity in a deal. Learn more →
Cost Segregation: An engineering-based study that reclassifies parts of a building into shorter depreciation lives to accelerate deductions. Learn more →

Debt Service Coverage Ratio (DSCR): NOI divided by annual loan payments. Lenders use DSCR to size loans; many require coverage comfortably above 1.0x, with the exact minimum depending on the lender and loan program.
Depreciation Recapture: On a sale, the portion of gain attributable to depreciation previously taken. For real property it is generally taxed federally at up to 25%. Learn more →
Distribution Waterfall: The order in which a deal’s cash flow and sale proceeds are split between investors and the sponsor, as defined in the offering documents. Learn more →
Due Diligence: The period after an accepted offer when the buyer verifies financials, leases, physical condition, title, and permits before closing.

Estoppel Certificate: A signed tenant statement confirming lease terms, rent, and deposit. Buyers often request estoppels so the rent roll can be relied on at closing. Learn more →
Expense Ratio: Operating expenses divided by effective gross income. It helps compare how efficiently similar buildings are run. Learn more →

General Partner (GP) & Limited Partner (LP): In a syndication, the GP (sponsor) finds, finances, and manages the property; LPs contribute capital and are passive, with liability generally limited to their investment. Learn more →
Gross Rent Multiplier (GRM): Price divided by gross annual rent. GRM is a quick screening metric for comparing similar buildings; it ignores expenses, so it is less precise than a cap rate. Learn more →

Letter of Intent (LOI): A short written proposal covering price and key terms — deposit, diligence period, closing timeline — that frames the purchase agreement.
Loss-to-Lease: The gap between market rent and the rent tenants actually pay under current leases. A large loss-to-lease can signal upside for a buyer.

Net Operating Income (NOI): Income from a property’s operations after vacancy, credit loss, and operating expenses — but before debt service, capital expenditures, depreciation, and income taxes. NOI is the number most buyers use to value an apartment building. Learn more →

Off-Market Sale: A sale negotiated privately without a public listing, often for confidentiality or to avoid disrupting tenants and staff. Learn more →

Pocket Listing: A property an agent markets privately to selected buyers instead of listing it publicly. Learn more →
Preferred Return: A threshold return that investors receive before the sponsor shares in profits under a deal’s distribution terms. It is a priority of payment, not a guarantee. Learn more →

Qualified Intermediary: The independent party that holds sale proceeds during a 1031 exchange so the seller never takes receipt of the funds. Learn more →

Real Estate Syndication: A structure in which a sponsor pools capital from multiple investors to buy a property that none would typically buy alone. Learn more →
Rent Roll: A unit-by-unit list of tenants, lease dates, rents, deposits, and balances. Together with the T-12, it is the first document a buyer asks for.
Rent Stabilization: Rules that limit how much and how often rent can rise on covered units, usually with registration and just-cause requirements. Learn more →
Rule 506(b) & 506(c): SEC Regulation D exemptions for private offerings. 506(b) prohibits general solicitation; 506(c) allows it but requires verifying every investor is accredited. Learn more →

Schedule K-1: The tax form a partnership issues each investor, reporting their share of income, losses, and deductions for the year. Learn more →
Seller Financing: The seller carries part of the purchase price as a loan to the buyer, secured by the property, with agreed interest, term, and payoff date. Learn more →
Stepped-Up Basis: For inherited property, the tax basis generally resets to fair market value at the owner’s date of death, which can reduce capital gains on a later sale. Learn more →

T-12 (Trailing Twelve Months): An operating statement showing a property’s actual income and expenses for the most recent twelve months. Buyers compare the T-12 with the rent roll to understand how the building really performs.

Vacancy & Credit Loss: The income lost to empty units and unpaid rent, usually expressed as a percentage of gross potential rent. Learn more →
Value-Add: A strategy of buying a property with room to improve — renovations, better management, or lease-up — to raise NOI and value over time.

Resources