A Licensed Lender that is democratizing real estate for all

Terminology

  • Appreciation
    An increase in value is referred to as “appreciation”.
  • Amortization
    As opposed to an interest-only loan in which each repayment installment consists only of interest payments with a single lump-sum principal repayment at the end of the loan period, each repayment installment of an amortizing loan consists of both principal and interest.
  • Accredited Investor
    An accredited investor is a term used by the U.S. Securities and Exchange Commission (SEC) under Rule 501 of Regulation D.
  • Basis Point
    A basis point (bps) is a unit that is equal to 1/100th of 1%, in other words one basis point is equal to 0.01%, similarly a 1% change is equal to a 100 basis point change.
  • Capital
    Capital is any financial asset or the value of an asset.
  • Crowdfunding
    Funding a product, idea, or venture using small amounts of money raised from the “crowd."
  • Capitalization (Cap) Rate
    Cap Rates measure a property’s yield (return) in a one-year time frame.
  • Common Equity
    Common Equity means that investors have one-to-one (or equal) participation in each dollar invested and any potential profits or losses.
  • Development
    Development is the process of building or adding to existing structures to increase the value of a property.
  • Distributions
    Payments made to investors periodically, typically over the course a calendar year, either from profits or interest payments.
  • Debt
    An amount of money (obligation) owed by one party (the debtor) to another party (the creditor).
  • Equity
    As it relates to real estate, equity can be measured as the amount of capital a sponsor (property owner/developer) puts into a property.
  • Free Cash Flow (FCF)
    Free cash flow is a measure of a property’s ability to generate cash after setting aside reserves for capital expenditures such as future development, tenant improvements, and leasing commissions.
  • Hard Asset
    A tangible object of worth that is owned by a business or individual.
  • Intrastate Crowdfunding
    While the Securities and Exchange Commission regulates public securities on a national level, each state also has its own regulatory entity serving a similar function. Since the passage of the JOBS Act, advocates of equity crowdfunding have moved to legalize intrastate – or in state – crowdfunding.
  • Internal Rate of Return (IRR)
    Internal Rate of Return is used to measure the profitability of an investment.
  • Jumpstart Our Business Startups (JOBS) Act
    The JOBS Act was a law passed in 2012 in the United States that eased regulations related to funding small businesses. Intended to increase American job creation and foster economic growth, the JOBS Act aims to provide easier access to public capital markets and small, growing companies.
  • Loan-to-Value Ratio (LTV)
    A risk assessment ratio that lenders perform when considering a real estate loan.
  • Loan-to-Cost Ratio (LTC)
    The Loan-to-Cost Ratio is the ratio of a loan used to help finance a project compared to the total cost.
  • Mezzanine Debt vs. Preferred Equity
    Mezzanine Debt is generally a loan that is secured by a property and senior to any equity, but junior to the senior loan on the property. Preferred Equity, on the other hand, is an equity investment in the property-owning entity. It is not secured by the property but rather by an interest in the entity investing in (or owning) the property
  • Preferred Return
    A Preferred Return is paid to investors before a sponsor receives any share of the cash flow.
  • Pro-Forma
    A financial model often used in real estate to predict future cash flows and total investment returns.
  • Preferred Equity
    Typically in a Preferred Equity investment, all cash flow or profits are paid back to the preferred investors (after all debt has been repaid) until they receive the agreed upon “preferred return.”
  • Project Payment Dependent Notes
    A Project Payment Dependent Note is a special, limited obligation of Fundrise Investments, LLC sold to investors, the proceeds of which are used to fund corresponding project investments.
  • Regulation D
    Regulation D permits raises of unlimited amounts from accredited investors without registering a public sale through the SEC, as it’s assumed that accredited investors are financially able to bear the burden of investment decisions without a review by the SEC.
  • Regulation A+
    Regulation A+ is the SEC’s proposed revision of the current Regulation A, which was mandated by the JOBS Act in 2012.
  • Regulation A
    Regulation A allows unaccredited investors to purchase small offerings of securities that do not exceed $5 million in a 12-month period.
  • Redemption
    In the event of back taxes or unpaid liens, a borrower who pays off those debts may reclaim their property, preventing foreclosure or the auctioning of their property.
  • Real Estate
    Real estate includes a parcel of land and any of its permanent structures (buildings, parking lots, etc.).
  • Secured vs Unsecured Position
    A secured position in the Capital Stack retains the right to foreclose on a property in the event of a default, or non-performance. Unsecured creditors do not have the right to foreclose on the property, and therefore have less collateral backing their investment claim.
  • Senior Debt
    The "base" of the Capital Stack -- Senior Debt is generally secured debt that must be repaid first.
  • Title III Regulation Crowdfunding
    Outlined in the 2012 JOBS Act, Title III instructed the SEC to create an exemption from registration that, when implemented, will enable issuers to engage in crowdfunding equity offerings to the general investing public.
  • Term
    The lifespan of a given asset or liability.
  • The Capital Stack
    The Capital Stack orders the seniority of claims to the collateral and cash waterfall of an entity.
  • The Jumpstart Our Business Startups (JOBS) Act
    The Jumpstart Our Business Startups (JOBS) Act is a law intended to facilitate funding of small businesses by easing regulations.
  • Tenancy / Occupancy
    Occupancy is generally referred to as a percentage of the total square feet or units leased – it is a building’s revenue source.
  • Transparency – At Fundrageous that means
    1) invested funds go directly to an attorney escrow account, we never touch it,
    2) as an investor, you own a piece of the note not an ownership in a fund,
    3) we have a concise default policy and
    4) we have a clearly laid out business continuity plan.
  • Unaccredited Investor
    An investor who does not meet the wealth requirements of an accredited investor set forth by the SEC.