Glossary

glossary

It’s important for us that you feel comfortable when investing in private money real estate transactions through ranchoted.

Throughout our Investment Opportunity Project Sheets and in our discussions we use a series of terms to describe particulars that are important to understanding each investment opportunity. That being said, we have created the following collection of terms we commonly use and provided our definitions intended as a guide for you to educate yourself on the private money lending industry.

Borrower
A person seeking a short-term loan on their property.

First Position
The most prioritized position for an investment.

Investor

A person looking to get a high yield through private money real estate investing.

Interest Only
Where interest is paid on a monthly basis, yet the principal loan is not paid down. This type payment is generally used by a Borrower to keep overhead low and minimize payments in tough financial times. The benefit to the Investor is generally that the monthly return is higher.

Investment Yield (a.k.a Return on Investment)
The profit percentage that is made on an investment. This figure varies according to the risk associated with the investment.

Late Fee
A penalty payment made by the borrower for missing a payment deadline.

Lean
A legal claim against a property.

Loan Amount
The amount of money that is being borrowed by the Borrower.

Loan to Value Ratio (a.k.a ‘LTV’ Ratio)

The Loan Amount divided by the fair market Property Value.

Monthly Return

The interest received from the investment.

Private Money

The term used to describe the industry of short term real estate lending transactions between individuals. These transactions are generally more specialized than traditional lending, therefore providing an opportunity for individuals to yield returns from real estate lending.

Property Value
The amount of fair market worth on a property.

Second Position (a.k.a ‘Junior Lean’)

A lean that is behind first position. A Second Position loan is generally of higher risk.

Term
The length of time for which an Investors money is borrowed.

Trust Deed
The document that embodies the agreement between a lender and a borrower to transfer interest in the borrowers land to a neutral third party, a trustee, to secure the payment of the debt by the borrower.