Capital Call

A request from the sponsor for additional funds after the initial investment, typically used for major repairs or renovations.

Cash Flow

The income remaining after all property-related expenses are paid—typically distributed monthly or quarterly to investors.

Cash-on-Cash Return (CoC)

A metric showing annual cash income compared to the amount of cash invested.

Cap Rate (Capitalization Rate)

Used to evaluate a property’s profitability based on net operating income (NOI) and purchase price.

Cost Segregation

A tax strategy that accelerates depreciation by identifying and reclassifying building components into shorter-life categories.

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Debt Service

The total of loan payments due, including principal and interest.

DSCR (Debt Service Coverage Ratio)

A measure of a property's ability to cover debt obligations from its income. A DSCR greater than 1.0 means the property generates more income than it owes.

Depreciation

A tax benefit that lets investors deduct the "wear and tear" on a property over time, even if the property is increasing in value.

Distributions

Payments made to investors from a property's cash flow—usually monthly or quarterly.

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Equity

An ownership interest in a property. In syndications, equity is usually split between passive investors (LPs) and sponsors (GPs).

Exit Strategy

The plan for how the investment will be concluded, such as a sale or refinance of the property.

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Freedom Number

The amount of monthly passive income you need to cover your living expenses and walk away from needing to work.

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GP (General Partner)

The sponsor or operator who manages the deal, raises capital, oversees the asset, and executes the business plan.

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IRR (Internal Rate of Return)

A metric that estimates the total return on investment, factoring in both time and money, including all distributions and final sale profits.

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K-1 (Schedule K-1)

A tax form showing an investor’s share of income, deductions, and credits in a partnership (like a real estate syndication).

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LP (Limited Partner)

A passive investor who provides capital to a deal but doesn’t participate in the active management of the asset.

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Multifamily Property

A residential property with more than one unit—like duplexes, triplexes, and apartment buildings—often used for scalable real estate investing.

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Net Operating Income (NOI)

The income a property generates after operating expenses, but before debt service and taxes.

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Operating Agreement

A legal contract outlining the rights and responsibilities of each party involved in an investment partnership.

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Passive Income

Income that doesn’t require ongoing time or effort to maintain, such as rental income or syndication distributions.

Private Placement Memorandum (PPM)

A legal document that outlines the terms, structure, and risks of a private investment offering.

Pro Forma

A projected financial statement estimating future income, expenses, and returns.

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Refinance

Replacing an existing loan with a new one—often to unlock equity, reduce payments, or fund renovations.

Returns

The profit made on an investment, including cash flow, appreciation, and tax benefits.

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Syndication

A group investment structure where multiple people pool capital to acquire larger real estate assets, usually led by a sponsor.

Sponsor

The individual or team that sources the deal, manages operations, and communicates with investors.

Self-Directed IRA (SDIRA)

A retirement account that lets you invest in alternative assets like real estate, private funds, or notes—beyond traditional stocks and bonds.

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Tax-Deferred

Refers to income or gains that are not taxed until a future event, such as retirement withdrawals.

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Underwriting

The financial analysis of an investment opportunity, including rent projections, expenses, risk factors, and assumptions.

UDFI (Unrelated Debt-Financed Income)

A tax that may apply when retirement accounts invest in leveraged real estate deals. Solo 401(k)s are typically exempt from this.