277 terms

Glossary

Essential mortgage and real estate investing terminology explained in plain language

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #

A

A Lender: A major bank or institutional lender offering the most competitive mortgage rates and terms but with the strictest qualification criteria, including full income verification and stress test compliance. Most investors use A lenders for their first four to six properties.
Above-Market Rent: Rental rates higher than comparable properties in the same area. Above-market rents can inflate DSCR calculations artificially and may lead to higher vacancy or tenant turnover when leases expire.
Absorption Rate: The rate at which available properties are sold or leased in a specific market during a given time period. A high absorption rate indicates strong demand, while a low rate suggests a buyer's or tenant's market.
Adjusted Cost Base: The original purchase price of a property plus qualifying capital improvements and acquisition costs, minus any CCA claimed. The adjusted cost base is subtracted from the sale price to determine the taxable capital gain.
ADU: Accessory Dwelling Unit - a secondary residential unit on a single-family property, such as a basement suite, laneway house, garden suite, or in-law suite. ADUs increase rental income and property value while leveraging existing land and infrastructure.
After Repair Value: The estimated market value of a property after all planned renovations and improvements are completed. ARV is a critical calculation for BRRRR investors and house flippers to determine maximum purchase price and projected profit margins.
After Repair Value (ARV): After Repair Value (ARV) is the estimated market value of a property after all planned renovations and improvements have been completed, typically determined through comparable sales analysis. Canadian real estate investors use ARV to evaluate the profit potential of fix-and-flip or value-add projects and to determine how much financing a private or hard money lender may be willing to extend on the deal.
Airbnb: An online marketplace connecting property owners with short-term guests. In real estate investing, Airbnb is commonly used as shorthand for the short-term rental business model, which involves higher operational demands but potentially higher returns than long-term rentals.
Amortization: The period over which a mortgage is scheduled to be fully paid off through regular payments of principal and interest. In Canada, common amortization periods are 25 or 30 years, though the mortgage term (when you renegotiate) is typically 1-5 years.
Anchor Tenant: A major tenant in a commercial property, typically a well-known retailer or business, that draws customers and other tenants to the location. Anchor tenants provide stability and are a key factor in commercial property valuation.
Appraisal: A professional assessment of a property's market value, required by lenders to ensure the property is worth the loan amount.
Appreciation: The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.
ARV: After Repair Value - the estimated market value of a property after all renovations and improvements are completed. Calculated by comparing to recently sold comparable properties in the area that are in updated condition. ARV is the foundation of the 70% rule and critical for BRRRR and fix-and-flip strategies.
Asset Management: The strategic oversight of an entire real estate portfolio, including decisions about refinancing, rent optimization, acquisitions, dispositions, and long-term planning. Distinct from property management, which handles day-to-day operations.
Assignment of Contract: A legal mechanism where a buyer transfers their rights under a purchase agreement to a third party before closing. This is the core technique in wholesaling, with the assignor profiting from the difference between contract and assignment price.
Assumable Mortgage: A mortgage that can be transferred to a new buyer along with the property, keeping the original terms and rate. Can be valuable when rates are higher.
AVM: Automated Valuation Model - a technology-driven tool that estimates a property's market value using algorithms, public records, comparable sales data, and market trends. Some lenders accept AVMs instead of full appraisals for lower-risk transactions, which saves borrowers the $300-500 appraisal fee and speeds up the approval process.

B

B Lender: Alternative lenders that serve borrowers who don't qualify with major banks, offering slightly higher rates with more flexible criteria.
Bank of Canada: Canada's central bank that sets the overnight lending rate, which influences prime rates and mortgage costs across the country. Rate decisions directly impact variable mortgage rates and overall borrowing costs for real estate investors.
Bankruptcy: A legal process where an individual or business declares inability to repay debts. Bankruptcy severely impacts credit scores and mortgage qualification for years, though recovery and re-entry into real estate investing is possible with time and rebuilt credit.
Bare Trust: A legal arrangement where one party holds legal title to a property on behalf of another. In Canadian investing, bare trusts let investors buy property personally for easier mortgage approval while a corporation retains beneficial ownership.
Beacon Score: The Canadian credit score produced by Equifax, ranging from 300 to 900. Most Canadian mortgage lenders require a minimum Beacon score of 600-680 for conventional financing, with the best rates available above 720. The Beacon score is similar to the FICO score used in the United States and factors in payment history, credit utilization, length of credit history, and credit mix.
Below-Market Rent: Rental rates lower than comparable properties in the same area. Below-market rents represent a value-add opportunity where an investor can increase property value by raising rents to market levels.
Bird Dogging: The practice of finding undervalued or distressed properties and passing those leads to active investors for a referral fee. Bird dogs do not buy or sell properties themselves, making it a low-capital entry point into real estate.
Blanket Loan: A blanket loan is a single mortgage that finances multiple properties under one loan agreement, allowing Canadian real estate investors to consolidate financing for several investment properties rather than maintaining separate mortgages for each. This can simplify portfolio management and potentially offer better terms, though a release clause is typically negotiated to allow individual properties to be sold without triggering full repayment of the entire loan.
Blanket Mortgage: A single mortgage that covers multiple properties, often used by investors to simplify financing for a portfolio. Allows release of individual properties as they're sold.
Bridge Financing: Short-term financing (90 days to 1 year) that covers the gap between purchasing a new property and selling or refinancing another. Investors use bridge loans to act quickly on deals or fund renovations before long-term financing is in place.
Bridge Loan: A bridge loan is a short-term financing solution that allows Canadian real estate investors to access the equity in their existing property to fund the purchase of a new property before the current one has sold. It "bridges" the gap between the closing date of a new purchase and the sale of an existing property, typically carrying higher interest rates and lasting from a few weeks to several months.
Broker Fees: Broker fees are the commissions or charges paid to a mortgage broker for arranging financing on behalf of a borrower, typically ranging from 0.5% to 2% of the loan amount in Canada, though they may be higher for complex or private lending arrangements. For real estate investors, these fees are a tax-deductible financing cost and are especially common when securing non-traditional mortgages for investment properties that may not qualify through standard lender channels.
BRRRR: Buy, Rehab, Rent, Refinance, Repeat - a real estate investment strategy where you purchase a property below market value, renovate it to increase value, rent it out, refinance to pull out your initial investment, and repeat the process with the recovered capital.
BRRRR Strategy: The BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat) is a real estate investment approach where Canadian investors purchase undervalued properties, renovate them to increase value, rent them out, then refinance to pull out equity for purchasing additional properties. This method allows investors to recycle their initial capital across multiple properties, though success depends on finding properties with sufficient value-add potential and meeting Canadian lenders' refinancing requirements, typically requiring a seasoned ownership period.
Building Permit: Official municipal approval required before conducting certain types of construction or renovation work, ensuring compliance with building codes and safety regulations. Unpermitted work on investment properties can result in fines, required demolition, difficulty selling, and voided insurance claims.
Business Acquisition Financing: Loans used to purchase an existing business, typically qualified based on the business's net operating income and historical financials. Some programs can cover up to 100% of the purchase price for qualified buyers.
Buying Power: Buying power refers to the maximum property value or mortgage amount a real estate investor can qualify for based on their income, credit score, existing debts, and available down payment. For Canadian investors, this determines how much property they can acquire and is directly affected by current interest rates, lending guidelines from OSFI, and stress test requirements.

C

Cap Rate: Capitalization Rate - the ratio of a property's net operating income (NOI) to its current market value or purchase price. A 6% cap rate means the property generates $60,000 NOI annually on a $1,000,000 value. Used to compare investment properties regardless of financing.
Capital Cost Allowance: The Canadian tax deduction that allows property owners to write off the depreciation of a building over time, reducing taxable rental income. CCA cannot be used to create a rental loss and must be recaptured upon sale of the property.
Capital Expenditures: Major one-time expenses for property improvements that extend the useful life of the asset, such as roof replacement, foundation repairs, or new HVAC systems. CapEx differs from regular maintenance and is typically budgeted separately in investment property analysis.
Capital Gains Tax: Tax owed on the profit from selling an investment property, calculated as the difference between the sale price and the adjusted cost base. In Canada, 50% of capital gains are included in taxable income, though recent changes have increased the inclusion rate for amounts over $250,000.
Capital Recycling: The strategy of pulling equity out of existing properties through refinancing and redeploying that capital into new acquisitions. Capital recycling is the engine behind scaling a portfolio without fresh savings for every down payment.
Capitalization: The total value of a property based on its income-producing potential, calculated by dividing NOI by the cap rate. Also refers to the overall investment structure and the amount of debt versus equity used to acquire a property.
Carrying Costs: The ongoing expenses of holding a property, including mortgage payments, property taxes, insurance, utilities, and maintenance. Understanding carrying costs is essential during renovation periods when the property generates no rental income.
Cash Flow: The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Cash Reserve: Liquid funds set aside by a property investor to cover unexpected expenses such as repairs, vacancy periods, or mortgage payments during tenant turnover. Lenders may require proof of cash reserves as part of mortgage qualification.
Cash-on-Cash Return: A metric that measures the annual pre-tax cash flow relative to the total cash invested in a property. Calculated as annual cash flow divided by total cash invested, expressed as a percentage. A 10% cash-on-cash return means you earn $10,000 annually on a $100,000 investment.
Cash-Out Refinance: Refinancing for more than you owe to pull out equity as cash, often used to fund down payments on additional investment properties.
Closed Mortgage: A mortgage with restrictions on how much extra you can pay during the term, typically limited to 10-20% of the original balance per year. Prepaying beyond the allowed amount triggers a penalty (usually three months' interest or the interest rate differential). Closed mortgages offer lower rates than open mortgages in exchange for less flexibility.
Closing Costs: Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments.
CMHC: CMHC (Canada Mortgage and Housing Corporation) is a federal Crown corporation that provides mortgage loan insurance to lenders when borrowers have less than a 20% down payment, enabling Canadians to purchase homes with as little as 5% down. For real estate investors, CMHC insurance is available on owner-occupied properties of up to four units, but is generally not available for non-owner-occupied investment properties, meaning investors typically need at least 20% down and must seek conventional financing.
CMHC Insurance: Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.
CMHC MLI Select: A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.
Collateral Mortgage: A mortgage registered for more than the actual loan amount — often up to 125% of the property value. This allows borrowers to access additional funds later without paying for a new registration. Most major Canadian banks use collateral mortgages by default. The trade-off is that switching lenders at renewal typically requires a full discharge and new registration, which adds cost.
Commercial Lending: Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.
Commercial Mortgage: Financing for commercial properties like retail, office, or multifamily buildings with 5+ units, with different qualification criteria than residential mortgages.
Common Area Maintenance: Expenses for maintaining shared spaces in commercial properties, including lobbies, parking lots, landscaping, and hallways. CAM charges are typically passed through to tenants as part of net lease structures.
Comparable Properties: Similar properties in the same market area used to establish fair market value or rental rates through comparison of features, location, condition, and recent sale or rental prices. Analyzing comps is essential when determining offer prices and setting competitive rents.
Condo Fees: Monthly fees paid by condo owners to cover building maintenance, insurance, common area utilities, reserve fund contributions, and amenities. Also known as strata fees or maintenance fees, these directly reduce cash flow and are a critical consideration when analyzing condo investment opportunities.
Condominium: A type of property ownership where an individual owns a specific unit within a larger building or complex, sharing ownership of common areas with other unit owners. Condos offer lower entry prices but come with monthly fees and potential rental restrictions that affect investment returns.
Construction Financing: A short-term loan that funds the building or major renovation of a property, disbursed in stages (draws) as construction milestones are completed. Once building is finished, the construction loan is typically replaced with a permanent mortgage through a process called takeout financing. Interest is charged only on the amount drawn.
Construction Loan: Short-term financing used to fund building a new property. Funds are released in stages (draws) as construction milestones are completed, and interest is charged only on drawn amounts. Construction loans typically convert to permanent financing upon project completion.
Consumer Proposal: A formal legal process in Canada where a debtor negotiates with creditors to repay a portion of outstanding debts as an alternative to bankruptcy. A consumer proposal affects credit reports and mortgage qualification for several years.
Contractor: A licensed professional hired to perform construction, renovation, or repair work on investment properties. Using licensed and insured contractors is essential for permitted work, as unlicensed contractors can result in voided insurance, property liens, and liability for injuries.
Conventional Mortgage: A mortgage with 20% or more down payment, not requiring default insurance. This is the standard financing type for investment properties in Canada, as high-ratio (insured) mortgages aren't available for pure rentals.
Convertible Mortgage: A short-term mortgage (usually 6 months or 1 year) that can be converted to a longer fixed-rate term at any time without penalty. Useful when you expect rates to drop and want to lock in later, or when you need short-term flexibility before committing to a longer term.
Corporate Veil: The legal separation between a corporation and its shareholders protecting personal assets from business liabilities. Courts can pierce the veil when corporate formalities are not maintained or finances are commingled.
Cottage Rental: A vacation property investment in recreational or resort areas. Four-season cottages with year-round activities tend to outperform three-season properties and may be more resilient during economic downturns.
Covenant: A binding agreement or promise in a property deed or loan document. Restrictive covenants limit property use, while loan covenants set conditions borrowers must maintain, such as minimum debt coverage ratios.
Coverage Ratio: A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.
Credit Score: A numerical rating (300-900 in Canada) that represents your creditworthiness, affecting mortgage rates and approval. 680+ is typically needed for best rates.
Credit Union: A member-owned financial cooperative that provides banking services including mortgage lending. Credit unions often have more flexible lending policies for real estate investors than major banks, particularly for borrowers who have exceeded conventional lending limits.
Credit Utilization: The percentage of your available credit that you're using. Keeping this under 30% helps maintain a healthy credit score.
Cross-Border Investing: Cross-border investing refers to Canadian real estate investors purchasing, financing, or managing properties in the United States or other foreign countries, which involves navigating different tax systems, financing requirements, currency exchange risks, and legal frameworks. This strategy allows Canadians to diversify their portfolios geographically and potentially access markets with lower property prices, higher rental yields, or stronger appreciation potential than their domestic market.
Cross-Collateralization: A lending arrangement where equity in one or more properties serves as additional security for a loan on another property. Common in blanket mortgages, it lets lenders use stronger properties to support weaker ones.
Curb Appeal: The visual attractiveness of a property as viewed from the street, which impacts buyer and tenant interest. Strong curb appeal can justify higher rents, reduce vacancy periods, and increase property values through relatively low-cost improvements like landscaping, fresh paint, and exterior maintenance.
Currency Risk: The potential for financial loss from fluctuations in foreign exchange rates. Canadian investors holding US or Mexican properties face currency risk because values and rental income in foreign currencies change in Canadian dollar terms.

D

Days on Market: The number of days a property has been listed for sale or rent without being leased or sold, used as an indicator of market demand and pricing appropriateness. Properties with high days on market typically signal pricing issues or property deficiencies.
Debt Consolidation: Combining multiple debts into a single loan, often through refinancing your mortgage. Can lower overall interest costs and simplify monthly payments.
Debt Ratios: Debt ratios are financial calculations lenders use to determine how much of your income goes toward debt payments, with the two main types being Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. For Canadian real estate investors, these ratios are critical qualifying factors that determine borrowing capacity, with most lenders requiring GDS below 39% and TDS below 44%, though rental income from investment properties can help offset these calculations.
Debt Service Coverage Ratio: The Debt Service Coverage Ratio (DSCR) measures a property's annual net operating income divided by its total annual mortgage payments, indicating whether rental income can cover debt obligations. Canadian lenders typically require a DSCR of 1.1 to 1.3 or higher for investment properties, meaning the property must generate 10-30% more income than needed to service the debt.
Debt Service Ratio: A broad term for ratios measuring a borrower's ability to service debt. In Canadian residential lending, the key ratios are GDS and TDS. In commercial lending, the DSCR serves a similar function but focuses on property income rather than personal income.
Debt-to-Income Ratio: A lending metric that compares a borrower's total monthly debt payments to their gross monthly income. Lenders use DTI to assess borrowing capacity, with most requiring ratios below 44% for mortgage approval.
Deemed Disposition: A tax event recognized by CRA where property is treated as if sold at fair market value even though no actual sale occurred. Triggered by death, emigration from Canada, or conversion of property use, creating a capital gains tax liability.
Deferred Maintenance: Necessary repairs and maintenance that have been postponed or neglected, creating a backlog of work that will eventually require attention. Properties with significant deferred maintenance can be value-add opportunities for investors willing to address accumulated issues.
Depreciation: An accounting method that allocates the cost of a building over its useful life as a tax deduction. In US real estate, depreciation reduces taxable rental income. The Canadian equivalent is Capital Cost Allowance (CCA).
Depreciation Report: An engineering study assessing the condition of a building's major components, estimating remaining useful life, and recommending reserve fund contributions. Lenders may decline condo financing without an adequate depreciation report.
Down Payment: The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.
Draw Schedule: A plan specifying when and how much of a construction loan's funds will be released as building milestones are reached. An inspector verifies work completion before each draw is disbursed.
DSCR: Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.
DSCR Loan: A loan qualified based on the property's Debt Service Coverage Ratio rather than the borrower's personal income, popular for US investment properties.
Due Diligence: The comprehensive investigation and analysis of a property before purchase, including financial review, physical inspection, title search, and market analysis.
Due-on-Sale Clause: A mortgage provision requiring the borrower to repay the loan in full if the property is sold or transferred. Transferring a property into a corporation may trigger this clause, requiring lender approval or refinancing.
Duplex: A residential property containing two separate dwelling units, either side-by-side or stacked. Duplexes are popular among beginner investors because they can house-hack by living in one unit while renting the other to offset mortgage costs.
Dynamic Pricing: A revenue management strategy where nightly rental rates are adjusted in real time based on demand, seasonality, local events, and competitor pricing. Used by short-term rental operators to maximize revenue.

E

E-2 Visa: An E-2 visa is a U.S. non-immigrant visa that allows citizens of treaty countries, including Canada, to enter and work in the United States based on a substantial investment in a U.S. business. For Canadian real estate investors, this visa can facilitate living in the U.S. while managing significant real estate investments or property-related businesses, though passive real estate investment alone typically does not qualify.
Earnest Money: A deposit made by a buyer to demonstrate serious intent to purchase a property. In wholesaling, earnest money secures the purchase contract. If the deal falls through due to buyer default, the earnest money may be forfeited.
Easement: A legal right to use another person's land for a specific purpose, such as access, utilities, or drainage. Easements transfer with the property and should be identified through title review before purchase.
Ejido Land: Communal agricultural land in Mexico that is collectively owned and cannot be legally sold to foreigners. Investors must verify land classification before purchasing Mexican property to avoid significant legal risk.
Encumbrance: Any claim, lien, charge, or liability attached to a property that may affect its transfer or value. Common encumbrances include mortgages, easements, property tax liens, and restrictive covenants.
Energy Efficiency: The effectiveness with which a property uses energy for heating, cooling, lighting, and other functions. Energy-efficient upgrades to rental properties reduce operating costs, increase NOI, and can add significant property value while qualifying for government rebates.
Environmental Assessment: A professional evaluation of a property's environmental condition, typically required by commercial lenders. Phase I reviews historical records for contamination risk. Phase II involves soil and water testing. Essential for commercial and industrial property purchases.
Equity: The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, appreciation, and property improvements.
Equity Multiple: A return metric calculated by dividing total distributions received by total equity invested. An equity multiple of 2.0x means the investor doubled their money over the investment period.
Equity Partner: An equity partner is an individual or entity that contributes capital to a real estate investment in exchange for an ownership stake and a share of the profits, rather than receiving fixed interest payments like a lender. In Canadian real estate investing, equity partners are commonly used to pool resources for purchasing properties that would be unaffordable individually, with profits and losses typically shared in proportion to each partner's contribution or as outlined in a partnership agreement.
Equity Takeout: Accessing the equity in your property through refinancing or a HELOC to use for other investments, renovations, or purposes.
Estate Freeze: A tax planning strategy that locks in the current value of assets for the original owner while transferring future growth to the next generation, minimizing capital gains tax triggered at death.
Estate Planning: The process of anticipating and arranging for the management and disposal of a person's estate during their life and after death, with the goal of minimizing taxes and ensuring a smooth transition for heirs.
Eviction: The legal process of removing a tenant from a rental property for reasons such as non-payment of rent, lease violations, or property damage. Eviction laws vary by province and typically require landlords to follow specific notice periods and tribunal processes.
Exit Strategy: An exit strategy is a predetermined plan outlining how a real estate investor intends to dispose of or transition out of a property investment to realize profits or minimize losses, such as selling, refinancing, converting to a different use, or transferring to a long-term hold. For Canadian investors, having a clear exit strategy is especially important when dealing with short-term financing like private mortgages or bridge loans, as lenders typically require borrowers to demonstrate a viable plan for repaying the loan within the term.

F

Family Trust: A legal entity that holds assets on behalf of family members. Family trusts enable income splitting and tax-free asset transfers for estate planning, though most lenders are reluctant to finance properties held in family trusts.
Fee Simple: The most complete form of property ownership, granting full rights to use, sell, lease, or bequeath the property indefinitely. In Mexico, foreigners can purchase fee simple outside the restricted zone.
Fideicomiso: A Mexican bank trust allowing foreigners to own property in Mexico's restricted zone within 50 km of coast or 100 km of borders. A Mexican bank holds legal title while the foreign buyer retains full beneficial ownership rights.
FIRPTA: Foreign Investment in Real Property Tax Act - a US tax law requiring buyers to withhold taxes when purchasing real estate from foreign sellers. Important for Canadians selling US properties.
Fix and Flip: Fix and flip is a real estate investment strategy where an investor purchases a property, typically below market value or in need of repair, renovates or improves it, and then resells it quickly for a profit. In Canada, investors pursuing this strategy should be aware that profits are generally taxed as business income rather than capital gains by the CRA, and financing is often arranged through private lenders or alternative mortgage sources since traditional lenders may not fund short-term investment purchases.
Fixed Rate Mortgage: A mortgage where the interest rate stays the same for the entire term, providing predictable monthly payments regardless of market changes.
Fixer-Upper: A property that needs repairs or renovations, typically priced below market value. Often targeted by investors using BRRRR or fix-and-flip strategies.
Forced Appreciation: An increase in property value driven by the owner's actions rather than general market conditions. Strategies include renovations, increasing rents, reducing vacancies, or cutting operating expenses. In commercial real estate, raising NOI directly increases the property's income-based appraised value.
Foreclosure: The legal process by which a lender seizes and sells a property after the borrower defaults on mortgage payments. In Canada, the process varies by province and may include judicial sale or power of sale. Foreclosed properties can offer below-market pricing but carry condition and title risks.
Foreign National Loan: Mortgage programs designed for non-US citizens investing in American real estate, with specific documentation and down payment requirements.
Foreign Tax Credit: A tax credit for income taxes paid to a foreign government. When Canadians earn rental income from US properties, the foreign tax credit prevents double taxation by offsetting Canadian tax by the amount already paid abroad.
Foundation: The structural base of a building that transfers loads to the ground. Foundation issues such as cracks, settling, or water intrusion are among the most expensive repairs in real estate and can significantly impact property value and financing eligibility.
Fourplex: A residential property containing four separate dwelling units. Fourplexes represent the largest property type that typically qualifies for residential mortgage financing, offering strong cash flow potential while avoiding commercial lending requirements.

G

GDS: Gross Debt Service ratio - the percentage of gross income needed to cover housing costs (mortgage, taxes, heating). Maximum typically 39%. For investors, rental income from the property can offset these costs through rental offset calculations.
GP/LP Structure: A General Partner / Limited Partner arrangement used in real estate syndications. The GP manages the project and assumes liability, while LPs invest capital passively with liability limited to their investment amount.
Gross Rent Multiplier: GRM - a property valuation metric calculated by dividing the purchase price by the annual gross rental income. A $500,000 property generating $60,000/year in gross rent has a GRM of 8.3. Lower GRMs generally indicate better value, though the metric doesn't account for operating expenses like cap rate does.

H

Hard Money Loan: A short-term loan from private lenders secured by the property itself rather than the borrower's creditworthiness. Hard money loans offer fast approvals and flexible terms but at higher interest rates, commonly used for fix-and-flip projects and bridge financing.
Heat Pump: An electric heating and cooling system that transfers heat between indoor and outdoor air. Cold-climate heat pumps eliminate carbon tax exposure on heating costs and can significantly reduce operating expenses compared to natural gas furnaces.
HELOC: Home Equity Line of Credit - a revolving credit line secured against your home's equity, allowing you to borrow as needed up to a set limit.
High-Ratio Mortgage: A mortgage with less than 20% down, requiring default insurance. Not available for 1-4 unit investment properties in Canada. However, 5+ unit multifamily can access CMHC MLI Select, and house hackers in owner-occupied 2-4 plexes can use insured financing.
Holding Company: A corporation created to own shares of other corporations or hold assets like investment properties. In real estate, a holding company sits above property-specific corporations, providing liability isolation and tax planning flexibility.
Home Staging: The process of furnishing and decorating a property to maximize its appeal to potential buyers or tenants, typically using neutral colors and strategic furniture placement. Well-staged properties consistently sell faster and at higher prices while attracting better-quality tenants.
House Hacking: Living in one unit of a multi-unit property while renting out the others to offset your mortgage payments and living expenses.
HVAC: Heating, Ventilation, and Air Conditioning systems that control temperature and air quality in buildings. HVAC is often one of the largest energy expenses in rental properties, and upgrading to high-efficiency systems can significantly reduce operating costs and increase NOI.

I

Income Splitting: A tax strategy that distributes income among family members in lower tax brackets to reduce overall family tax burden. In real estate, achieved through corporate structures, family trusts, or spousal loans, subject to Canadian tax restrictions.
Incorporation: The legal process of forming a corporation to own and operate investment properties. Incorporation creates a separate legal entity providing liability protection and tax planning options, but adds complexity and can affect mortgage qualification.
Industrial Property: Real estate used for manufacturing, warehousing, distribution, or storage. Industrial properties often feature long-term net leases with lower management requirements than residential or retail properties.
Insulation: Material installed in walls, attics, and floors to resist heat flow, measured by R-value. Upgrading insulation in older properties reduces heating and cooling costs, improves tenant comfort, and can qualify for government energy rebates.
Insured Mortgage: A mortgage backed by mortgage default insurance from CMHC, Sagen, or Canada Guaranty, required when the down payment is less than 20% on owner-occupied properties. The insurance premium (ranging from 2.8% to 4% of the mortgage) is added to the loan. Insured mortgages qualify for lower interest rates because the lender's risk is covered by the insurer.
Interest Rate: The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Interest-Only Mortgage: An interest-only mortgage allows the borrower to pay only the interest portion of the loan for a set period, typically ranging from five to ten years, after which payments increase to include principal repayment. For Canadian real estate investors, this structure maximizes cash flow during the interest-only period, freeing up capital for other investments or property improvements, though it means no equity is built through payments until the principal repayment phase begins.
Internal Rate of Return: A metric used to estimate the profitability of an investment, representing the annualized rate of return at which the net present value of all cash flows equals zero. IRR accounts for the time value of money and is commonly used in development and syndication analysis.
IRD: Interest Rate Differential - a mortgage penalty calculation based on the difference between your rate and current rates for the remaining term.
ITIN: Individual Taxpayer Identification Number - a US tax ID for foreign nationals, required for Canadians to invest in US real estate and file US taxes.

J

Joint Venture: A partnership between two or more parties to invest in real estate, combining capital, expertise, or credit to complete a deal.

L

Land Transfer Tax: A provincial tax paid when purchasing property, calculated as a percentage of the purchase price. Some cities like Toronto add additional municipal tax.
Landlord Insurance: Specialized property insurance designed for rental properties, covering building damage, liability claims, and optionally loss of rental income during repairs. Landlord insurance differs from homeowner's insurance by addressing the unique risks of tenant-occupied properties.
Landlord-Tenant Board: A provincial tribunal or administrative body that resolves disputes between landlords and tenants, handles eviction applications, and enforces residential tenancy legislation. Each Canadian province has its own board or tribunal with specific procedures and timelines.
Laneway House: A small detached dwelling built on an existing residential lot, typically facing a rear lane or alley. Also called garden suites or coach houses, laneway homes increase rental income and property value using existing land and infrastructure.
Lease Agreement: A legally binding contract between a landlord and tenant specifying rental terms including monthly rent, lease duration, responsibilities, rules, and termination conditions. Well-drafted lease agreements protect landlords' interests while complying with provincial residential tenancy legislation.
Lease Option: An agreement giving a tenant the right (but not obligation) to purchase the property at a predetermined price within a specified timeframe while renting.
Lease to Own: A lease to own arrangement allows a tenant to rent a property with an agreement that gives them the option or obligation to purchase it at a predetermined price within a specified period, with a portion of rent payments typically credited toward the purchase price. For Canadian real estate investors, this strategy can generate rental income while securing a future sale price, attract tenants who are more motivated to maintain the property, and provide a solution for buyers who need time to qualify for a mortgage or build a down payment.
Lease-Up Period: The time between when a new or renovated property is ready for tenants and when it reaches stabilized occupancy. During lease-up, the property generates below-target income while carrying full expenses, requiring adequate cash reserves.
Leverage: Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.
Lien: A legal claim against a property used as security for a debt. Liens arise from unpaid mortgages, property taxes, contractor work, or court judgments. Undiscovered liens can eliminate an apparent purchase discount on distressed properties.
LLC: Limited Liability Company - a US business structure commonly used to hold investment properties, providing liability protection and tax flexibility.
Loan-to-Cost Ratio: The percentage of a development project's total cost that a lender will finance. Unlike LTV which compares loan to appraised value, LTC compares loan to actual project costs including land, construction, and soft costs.
LTV: Loan-to-Value ratio - the mortgage amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower). An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV generally means better rates and terms.

M

Market Rent: The rental rate that a property could reasonably command in the current market based on comparable properties, location, and condition. Understanding market rent is essential to maximize income while maintaining competitive positioning and minimizing vacancy.
Market Value: The estimated price a property would sell for on the open market under normal conditions. Determined by comparable sales, location, condition, and market demand.
Maximum Loan Amount: The maximum loan amount is the highest mortgage value a lender will approve for a specific property or borrower, determined by factors such as the property's appraised value, loan-to-value ratio limits, and the borrower's qualification criteria. For Canadian real estate investors, this ceiling is particularly important as investment properties typically face lower LTV limits than owner-occupied homes, often capping at 80% of the property value.
Mezzanine Financing: A hybrid of debt and equity financing that sits between the first mortgage and the borrower's equity in the capital stack. Mezzanine lenders charge higher rates (typically 10-20%) because they are repaid after the first mortgage in a default. Common in commercial real estate and development projects where borrowers need to bridge the gap between their first mortgage and available equity.
Mid-Term Rental: A furnished rental leased for 30 days to 6 months, targeting travel nurses, corporate relocations, and remote workers. Mid-term rentals generate higher revenue than long-term leases with fewer regulatory hurdles than short-term rentals.
Mixed-Use Property: A building that combines residential and commercial uses, such as retail on the ground floor with apartments above. Mixed-use properties can diversify income streams and may qualify for commercial financing terms.
MLI Select: MLI Select is a CMHC mortgage loan insurance program that offers reduced premiums, longer amortization periods (up to 50 years), and higher loan-to-value ratios for multi-unit residential rental properties that meet specific affordability, accessibility, or climate compatibility criteria. For Canadian real estate investors, it provides significant financing advantages when building or purchasing rental properties that align with CMHC's social and environmental goals, effectively lowering costs in exchange for commitments like keeping a portion of units at below-market rents.
MLS: Multiple Listing Service - a database used by licensed real estate agents to list properties for sale, providing standardized property information, photos, and pricing. Investors also use off-market strategies to find deals not listed on the MLS.
Monoline Lender: A financial institution that exclusively originates mortgage loans without offering other banking products. Monoline lenders often provide competitive rates and more flexible investor policies than big banks, accessed through mortgage brokers.
Mortgage Broker: A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.
Mortgage Default: Failure to meet the terms of a mortgage agreement, typically by missing payments. Default can lead to power of sale or foreclosure proceedings, damaged credit, and loss of the property.
Mortgage Insurance Premium: The fee charged by CMHC or other insurers for mortgage default insurance on high-ratio mortgages. The premium is calculated as a percentage of the loan amount and can be added to the mortgage balance or paid upfront.
Mortgage Investment Corporation: A Canadian investment vehicle that pools capital from multiple investors to fund mortgage loans. MICs allow investors to earn returns from mortgage lending without directly originating loans, governed by the Income Tax Act.
Mortgage Penalty: A fee charged for breaking your mortgage early, calculated as either 3 months' interest or the Interest Rate Differential (IRD), whichever is greater.
Mortgage Qualification: Mortgage qualification is the process where a lender evaluates an investor's income, credit score, debt ratios, and financial assets to determine their eligibility for a mortgage and the maximum loan amount they can receive. For Canadian real estate investors, this includes passing the federal stress test at a qualifying rate typically 2% above the contract rate, which directly impacts purchasing power and investment strategy.
Mortgage Stress Test: A federal requirement to qualify at the higher of your contract rate +2% or the benchmark rate (around 5.25%). For investors, rental income can be used to offset this calculation, though lenders typically only count 50-80% of expected rent.
Mortgage Term: The length of time your mortgage contract and interest rate are in effect. Typically ranges from 1 to 5 years in Canada, after which you renew or refinance.
Multifamily: Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
Multifamily Financing: Multifamily financing refers to mortgage loans specifically designed for purchasing or refinancing residential properties with five or more units, such as apartment buildings or large rental complexes. For Canadian real estate investors, these commercial-style loans typically require larger down payments and are evaluated primarily on the property's rental income and net operating income rather than personal income alone.

N

Net Lease: A commercial lease where the tenant pays some or all operating expenses (taxes, insurance, maintenance) in addition to base rent. Variations include single net (N), double net (NN), and triple net (NNN) leases, shifting cost risk from landlord to tenant.
Net Worth Statement: A financial document listing all assets and liabilities to calculate total net worth. Commercial and portfolio lenders often require this as part of mortgage applications, using total equity across all properties as a qualification factor.
NOI: Net Operating Income - the total income a property generates minus all operating expenses, but before mortgage payments and income taxes. Calculated as gross rental income minus vacancies, property taxes, insurance, maintenance, and property management fees.
Non-Recourse Loan: A loan secured only by the property itself, with no personal liability for the borrower beyond the collateral. In Canada, non-recourse lending is typically available only for large institutional deals or CMHC-insured multifamily mortgages.
Notario: In Mexico, a licensed public official who authenticates real estate transactions, collects taxes, and ensures legal compliance. A notario is not an independent attorney; investors should hire their own lawyer separately.
Notice of Assessment: A document issued by the CRA after processing a tax return, confirming income reported and taxes owed or refunded. Mortgage lenders require Notices of Assessment as proof of declared income, especially for self-employed borrowers.

O

Occupancy Rate: The percentage of rental units that are currently occupied by paying tenants, calculated as occupied units divided by total available units. High occupancy rates indicate strong property management and market demand, while low rates signal problems that reduce cash flow.
Off-Market Deals: Off-market deals are properties sold privately without being listed on MLS or public platforms, typically found through direct outreach to owners, networking, or wholesalers. For Canadian investors, these transactions can offer reduced competition and potentially better pricing, though they require more active sourcing and careful due diligence without the transparency of listed sales.
Open Mortgage: A mortgage that can be paid off in full or in part at any time without penalty. Open mortgages carry higher interest rates than closed mortgages to compensate for this flexibility. They're useful for borrowers who expect to sell soon, receive a lump sum, or refinance in the near term.
Operating Expenses: The ongoing costs of running a rental property, including property taxes, insurance, maintenance, property management fees, utilities, and repairs. Subtracting operating expenses from gross rental income yields the net operating income.

P

Parental Guarantor: A parent who co-signs a lease on behalf of their child, becoming legally responsible for rent payments and property damage. Requiring parental guarantors is a key risk mitigation strategy in student rental investing.
Passive Income: Earnings from rental properties or investments that require minimal day-to-day involvement. The goal of most real estate investors seeking financial freedom.
Plumbing: The system of pipes, drains, fixtures, and fittings in a building that distributes water and removes waste. Plumbing issues are among the most costly repairs in rental properties, and older galvanized or polybutylene pipes often need replacement during renovations.
Portfolio Investor: A portfolio investor is a lender, often a credit union or private institution, that funds mortgages using their own capital and keeps the loans on their books rather than selling them to insurers like CMHC. For Canadian real estate investors, portfolio lenders are valuable because they often have more flexible qualification criteria and can approve deals that traditional banks following strict insurer guidelines would decline.
Portfolio Lender: A financial institution that keeps mortgage loans on its own books rather than selling them to insurers or the secondary market. Portfolio lenders offer more flexible qualification criteria, making them valuable for investors who have exceeded conventional lending limits.
Porting: Transferring your existing mortgage to a new property without penalty, keeping your current rate and terms. Useful when moving before your term ends.
Power of Sale: A clause in Canadian mortgages allowing the lender to sell a property without court involvement after the borrower defaults. Used in Ontario and some other provinces as a faster alternative to judicial foreclosure.
Pre-Approval: A conditional commitment from a lender stating your borrowing capacity, valid for 90-120 days. For investors, getting pre-approved helps you move quickly on deals and shows sellers you're a serious buyer with financing in place.
Pre-Construction: The purchase of a property before or during its construction phase, typically from a developer. Pre-construction purchases may offer built-in equity if values appreciate by completion, but carry completion risk including delays and developer insolvency.
Prepayment Privileges: Terms in your mortgage that allow extra payments without penalty, typically 10-20% of the original balance annually. Helps pay off your mortgage faster.
Prime Rate: The benchmark interest rate set by banks, which influences variable mortgage rates. It typically follows the Bank of Canada's overnight rate.
Principal: The original amount of money borrowed on a mortgage, not including interest. Each mortgage payment includes both principal (paying down what you owe) and interest (the cost of borrowing). Over time, more of each payment goes toward principal as the loan balance decreases.
Principal Residence Exemption: A Canadian tax provision eliminating capital gains tax on the sale of a property designated as the owner's principal residence. Strategic designation across multiple properties can significantly reduce lifetime tax liability.
Private Lending: Private lending involves obtaining mortgage financing from individual investors or non-institutional lenders rather than banks or credit unions, typically at higher interest rates but with more flexible qualification criteria. For Canadian real estate investors, private lenders offer a valuable alternative funding source for deals that may not meet traditional lending requirements, such as properties needing significant renovation or situations requiring fast closing timelines.
Private Mortgage: A mortgage from a private lender rather than a traditional bank, typically with higher rates but more flexible qualification requirements.
Private Mortgage Rate: A private mortgage rate is the interest rate charged by non-institutional lenders such as individuals or private lending companies, typically ranging from 8% to 18% in Canada, and is significantly higher than bank rates to compensate for the increased risk of lending to borrowers who may not qualify for conventional financing. For Canadian real estate investors, private mortgages can provide short-term bridge financing or fund deals quickly when traditional lenders decline, but the higher carrying costs must be carefully factored into investment returns.
Pro Forma: A projected financial statement for an investment property showing expected income, expenses, and returns. Pro formas are used to evaluate potential acquisitions and are required by many commercial lenders during underwriting.
Probate: The legal process of validating a deceased person's will and distributing their estate. Properties held personally must go through probate, causing delays and costs. Corporate or trust structures can bypass probate.
Property Inspection: A professional examination of a property's physical condition, including structural elements, mechanical systems, roofing, and other components, typically conducted before purchase. Thorough inspections help investors identify problems, estimate repair costs, and negotiate purchase prices.
Property Management: The operation, control, and oversight of real estate by a third party. Property managers handle tenant screening, rent collection, maintenance, and day-to-day operations.
Property Manager: A property manager is a professional or company hired by a real estate investor to handle the day-to-day operations of a rental property, including tenant screening, rent collection, maintenance, and ensuring compliance with provincial landlord-tenant legislation. For Canadian investors, using a property manager is especially common when owning multiple properties or investing in markets outside their home province, with management fees typically ranging from 5% to 10% of collected rent.
Property Tax: Annual tax levied by municipalities on real estate based on the assessed value of the property. Property taxes fund local services and are a significant operating expense that investors must account for in cash flow projections.
Property Tax Assessment: The process by which a municipality determines the value of a property for taxation purposes. Investors can appeal assessments they believe are too high, potentially reducing annual property tax expenses and improving cash flow.
Purchase Plus Improvements: A Canadian mortgage program that combines the purchase price with renovation costs into a single mortgage, based on the property's after-improvement value.

R

Rate Hold: A commitment from a lender to guarantee a specific mortgage interest rate for a set period, typically 90 to 120 days. Rate holds protect borrowers from increases while searching for a property or completing a purchase.
Raw Land: Undeveloped property without buildings, utilities, or infrastructure. Raw land investments offer potential for development or appreciation but generate no rental income and can be difficult to finance through traditional lenders.
Real Estate Agent: A licensed professional who represents buyers or sellers in real estate transactions, providing market expertise, negotiation skills, and access to the MLS. Working with an investor-friendly agent who understands rental property analysis and financing strategies can significantly impact deal quality.
Recapture: The inclusion of previously claimed Capital Cost Allowance (CCA) in income when a depreciable property is sold for more than its undepreciated capital cost (UCC).
Recourse Loan: A loan where the borrower is personally liable for repayment beyond the collateral value. If the property sells for less than owed at foreclosure, the lender can pursue the borrower's other assets. Most Canadian commercial mortgages under $5 million are full recourse.
Refinance: Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.
REIT: Real Estate Investment Trust - a company that owns, operates, or finances income-producing real estate, allowing investors to buy shares and earn returns without directly managing properties. REITs must distribute most of their taxable income as dividends.
Relationship Banking: A lending approach where borrowers cultivate long-term partnerships with financial institutions. At scale, relationship banking provides better rates, faster approvals, and creative deal structuring.
Release Clause: A provision in a blanket mortgage allowing the borrower to remove an individual property from the loan without refinancing the entire portfolio. Essential when planning to sell individual properties from a bundled mortgage.
Rent Control: Provincial regulations that limit how much a landlord can increase rent annually for existing tenants. Rules vary by province - Ontario caps increases at a government-set guideline, while Alberta has no rent control. Rent control directly impacts investment cash flow projections.
Rent Increase: The process of raising rental rates for existing or new tenants. In provinces with rent control, annual increases for existing tenants are capped at government-set guidelines, while new tenancies can often be set at market rates.
Rent Roll: A document listing all rental units in a property, including tenant names, lease terms, and rent amounts. Essential for verifying income during due diligence.
Rent-to-Own: An arrangement where a tenant rents a property with an option to purchase it at a predetermined price within a specified timeframe. A portion of rent payments may be credited toward the eventual purchase price.
Rent-to-Price Ratio: A metric comparing monthly rental income to a property's purchase price, expressed as a percentage. A higher ratio indicates stronger cash flow potential. Used to quickly screen properties and markets for investment viability.
Rental Application: A standardized form completed by prospective tenants providing personal information, employment details, rental history, and references used for tenant screening. Consistent use of rental applications helps landlords apply fair screening criteria and comply with fair housing requirements.
Rental Income: Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.
Rental Offset: Using a percentage of rental income (typically 50-80%) to help qualify for a mortgage by offsetting property carrying costs.
Rental Worksheet: A Rental Worksheet is a standardized form used by Canadian lenders to calculate the net rental income from an investment property, typically accounting for a vacancy allowance and operating expenses to determine how much rental revenue qualifies toward mortgage approval. This document helps investors demonstrate their property's cash flow when applying for financing on rental properties.
REO Property: Real Estate Owned - property repossessed by a lender after a failed foreclosure auction. Banks are motivated to sell REO properties quickly, which can create opportunities for investors willing to deal with condition issues.
Reserve Fund: Money set aside by a condo corporation or property owner for future major repairs and capital expenditures like roof replacement, building envelope repairs, or mechanical system upgrades. A well-funded reserve indicates responsible financial management and reduces the risk of special assessments.
Restricted Zone: In Mexican property law, land within 50 km of coastline and 100 km of international borders where foreigners cannot directly own real estate. Foreign buyers must use a fideicomiso or Mexican corporation.
Right of First Refusal: A contractual right giving a party the first opportunity to purchase a property before the owner can sell to someone else. Common in joint venture agreements and some commercial leases.
ROI: Return on Investment - a measure of profitability calculated by dividing net profit by total investment. Used to compare the efficiency of different investments.
Roof Replacement: A major capital expenditure involving the complete removal and installation of a new roofing system. Roof age and condition are critical factors in property inspections, insurance eligibility, and financing approvals, with typical costs ranging from $5,000 to $30,000+ depending on property size.
Room Rental: A strategy where individual rooms within a property are leased separately to different tenants rather than renting the entire unit. Room rentals generate higher per-property revenue but require more management and may have specific zoning and financing considerations.

S

Second Mortgage: A subordinate loan taken against a property that already has a first mortgage. Second mortgages have higher interest rates due to increased lender risk and can be used to access equity without refinancing the first mortgage.
Secondary Suite: A self-contained rental unit within or attached to a single-family home, such as a basement apartment, laneway house, or garden suite. Secondary suites help investors generate additional rental income from one property and can qualify for rental offset programs that improve mortgage qualification.
Security Deposit: Money collected from tenants at the beginning of a lease to cover potential damages beyond normal wear and tear or unpaid rent at lease end. Security deposit rules vary by province, with some jurisdictions limiting amounts and requiring deposits to be held in trust.
Seller Financing: A financing arrangement where the property seller acts as the lender, allowing the buyer to make payments directly to them instead of obtaining a traditional mortgage.
Shareholder Agreement: A contract between shareholders of a corporation defining rights, responsibilities, profit sharing, dispute resolution, and exit terms. Essential when multiple investors hold shares in a real estate holding corporation.
Short-Term Rental: A furnished property rented for periods shorter than 30 days through platforms like Airbnb or VRBO. Short-term rentals generate higher gross revenue but carry higher operating costs and stricter municipal regulations.
Single Family: A detached home designed for one household, the most common property type for beginner real estate investors.
Smith Manoeuvre: A Canadian tax strategy that converts non-deductible mortgage interest into tax-deductible investment loan interest over time.
Special Assessment: A one-time charge levied by a condo corporation on unit owners to cover major repairs or expenses not adequately funded by the reserve fund. Special assessments can range from a few thousand to tens of thousands of dollars per unit and represent a significant cash flow risk for investors.
Stabilized Property: A rental property that has reached its target occupancy level and is generating consistent, predictable income. Lenders and appraisers value stabilized properties more favorably than those in lease-up or transition.
Stated Income: A mortgage program where income is stated rather than fully documented, designed for self-employed borrowers with complex income situations.
Status Certificate: A legal document issued by a condominium corporation disclosing the building's financial health, reserve fund status, pending assessments, litigation, and rental restrictions. Lenders require this before approving condo financing.
STR: Short-Term Rental - a furnished property rented for periods of less than 30 days, typically through platforms like Airbnb or VRBO. STRs can generate 2-3x the income of long-term rentals but require more active management, higher operating costs, and compliance with local short-term rental regulations.
Strata Corporation: The governing body of a condominium building responsible for managing common property, collecting fees, maintaining reserve funds, and enforcing bylaws. The financial health of a strata corporation directly affects unit values and financing eligibility.
Student Rental: A rental property near a college or university leased to students, typically on a per-room basis. Student rentals generate higher cash flow than traditional single-family rentals because rent is collected per bedroom rather than per unit, with risk mitigated through parental guarantors.
Subject-To: A creative acquisition strategy where you take ownership of a property while the seller's existing mortgage stays in place. You make the payments, but the loan remains in the seller's name.
Succession Planning: The process of preparing for the eventual transfer of a real estate portfolio to heirs, partners, or professional managers. Includes documentation, insurance planning, legal structuring through wills and trusts, and gradual transition of operational responsibility.
Syndication: Pooling capital from multiple investors to purchase larger properties, typically structured with general partners (operators) and limited partners (investors).

T

Takeout Financing: Permanent long-term mortgage financing that replaces a short-term construction loan after a development project is completed and stabilized. Securing a takeout commitment before construction begins reduces project risk.
Tax Deferral: A strategy that postpones payment of taxes to a future date. In Canadian real estate, holding properties in a corporation creates tax deferral because corporate tax rates are lower than top personal rates. Deferred tax becomes payable when funds are distributed to shareholders.
Tax Shelter: A legal strategy or investment that reduces taxable income. Real estate is one of the most effective tax shelters due to deductions like mortgage interest, depreciation (CCA), operating expenses, and capital gains deferrals.
TDS: Total Debt Service ratio - the percentage of gross income needed to cover all debt payments. Maximum typically 44%. Investors can use rental income (50-80% offset) to help qualify, making it possible to scale a portfolio despite existing debts.
Tenant Improvement: Modifications made to a commercial rental space to meet a tenant's specific needs, often funded by the landlord as an incentive. TI allowances are a standard part of commercial lease negotiations.
Tenant Screening: The process of evaluating prospective tenants through credit checks, employment verification, rental history reviews, and reference checks. Thorough screening is the most effective way landlords can prevent costly problem tenancies and reduce turnover.
Title Insurance: Insurance that protects against losses from defects in title to a property, such as liens, encumbrances, or ownership disputes.
Townhouse: A multi-story residential unit that shares one or more walls with adjacent units but has its own entrance. Townhouses offer a middle ground between condos and detached homes, often with lower purchase prices and condo-like fee structures.
Traditional Lender: A traditional lender is a federally or provincially regulated financial institution, such as a major bank or credit union, that offers mortgage financing with standardized qualification criteria including stress tests, income verification, and typically the most competitive interest rates. For Canadian real estate investors, traditional lenders usually offer the best rates but impose stricter requirements around debt service ratios and the number of financed properties allowed, which can limit portfolio growth.
Triple Net Lease: A commercial lease (also called NNN) where the tenant pays base rent plus all three major operating expenses: property taxes, insurance, and maintenance. The landlord receives predictable net income with minimal management responsibility. Common in retail, industrial, and single-tenant commercial properties.
Triplex: A residential property containing three separate dwelling units. Triplexes offer higher rental income potential than duplexes while still qualifying for residential mortgage financing in most cases, making them attractive to growing investors.
Turnkey Property: An investment property that's fully renovated and often already tenanted, ready to generate income immediately after purchase.
Turnover: The process and cost of preparing a rental unit for a new tenant after the previous tenant moves out, including cleaning, repairs, marketing, and vacancy time. High turnover rates significantly reduce profitability through lost rent and preparation expenses.

U

Underwriting: The process lenders use to evaluate the risk of a mortgage application, including reviewing credit, income, assets, and property value to determine loan approval.
Uninsured Mortgage: A mortgage without government-backed default insurance, required when the down payment is 20% or more, or for investment properties and refinances. Uninsured mortgages typically carry slightly higher interest rates than insured ones because the lender bears the full default risk. Most investment property mortgages in Canada are uninsured.

V

Vacancy Rate: The percentage of rental units that are unoccupied over a given period. A critical factor in cash flow analysis, typically estimated at 4-8% for conservative projections.
Value-Add Property: A property with potential to increase value through renovations, better management, rent increases, or adding units.
Variable Rate Mortgage: A mortgage where the interest rate fluctuates with the prime rate, meaning your payments or amortization can change over time.
Vendor Take-Back: A Canadian term for seller financing where the vendor (seller) provides a mortgage to the buyer for part of the purchase price, often used to bridge financing gaps.
VTB: An abbreviation for Vendor Take Back mortgage, where the seller of a property provides financing to the buyer to facilitate the sale.

W

Wholesaling: A real estate investment strategy where an investor contracts to buy a property and then assigns that contract to another buyer for a fee, without ever taking ownership. Wholesaling requires minimal capital but significant marketing and negotiation skills.

Z

Zoning: Municipal regulations that dictate how properties in specific areas can be used, including residential, commercial, industrial, or mixed-use designations. Zoning bylaws affect what investors can do with properties, including rental restrictions, multi-unit conversions, and home-based businesses.

#

1% Rule: A quick screening formula where the monthly rent should equal at least 1% of the purchase price. A $200,000 property should rent for $2,000/month to pass the test. It's a rough filter for cash flow potential — not a substitute for full analysis, but useful for quickly eliminating poor deals.
100% Financing: A mortgage structure where no down payment is required from the borrower's personal funds. In Canada, this is available for owner-occupied commercial properties through CMHC programs and for residential purchases using gifted down payments, borrowed down payments (where permitted), or vendor take-back mortgages combined with a first mortgage.
1031 Exchange: A US tax provision allowing investors to defer capital gains taxes by reinvesting proceeds from a property sale into a like-kind replacement property within specific timeframes. Not available in Canada, but relevant for Canadians investing in US real estate.
70% Rule: A fix-and-flip guideline stating you should pay no more than 70% of a property's after-repair value (ARV) minus renovation costs. On a home with a $300,000 ARV and $50,000 in repairs, your max purchase price would be $160,000. This margin accounts for holding costs, selling costs, and profit.

Real Estate Investor Dictionary

LendCity Mortgages — Your Guide to Strategic Financing

Expert Financial | DLC

LendCity.ca

A

A Lender

A major bank or institutional lender offering the most competitive mortgage rates and terms but with the strictest qualification criteria, including full income verification and stress test compliance. Most investors use A lenders for their first four to six properties.

Above-Market Rent

Rental rates higher than comparable properties in the same area. Above-market rents can inflate DSCR calculations artificially and may lead to higher vacancy or tenant turnover when leases expire.

Absorption Rate

The rate at which available properties are sold or leased in a specific market during a given time period. A high absorption rate indicates strong demand, while a low rate suggests a buyer's or tenant's market.

Adjusted Cost Base

The original purchase price of a property plus qualifying capital improvements and acquisition costs, minus any CCA claimed. The adjusted cost base is subtracted from the sale price to determine the taxable capital gain.

ADU

Accessory Dwelling Unit - a secondary residential unit on a single-family property, such as a basement suite, laneway house, garden suite, or in-law suite. ADUs increase rental income and property value while leveraging existing land and infrastructure.

After Repair Value (ARV)

After Repair Value (ARV) is the estimated market value of a property after all planned renovations and improvements have been completed, typically determined through comparable sales analysis. Canadian real estate investors use ARV to evaluate the profit potential of fix-and-flip or value-add projects and to determine how much financing a private or hard money lender may be willing to extend on the deal.

After Repair Value

The estimated market value of a property after all planned renovations and improvements are completed. ARV is a critical calculation for BRRRR investors and house flippers to determine maximum purchase price and projected profit margins.

Amortization

The period over which a mortgage is scheduled to be fully paid off through regular payments of principal and interest. In Canada, common amortization periods are 25 or 30 years, though the mortgage term (when you renegotiate) is typically 1-5 years.

Airbnb

An online marketplace connecting property owners with short-term guests. In real estate investing, Airbnb is commonly used as shorthand for the short-term rental business model, which involves higher operational demands but potentially higher returns than long-term rentals.

Anchor Tenant

A major tenant in a commercial property, typically a well-known retailer or business, that draws customers and other tenants to the location. Anchor tenants provide stability and are a key factor in commercial property valuation.

Appraisal

A professional assessment of a property's market value, required by lenders to ensure the property is worth the loan amount.

Appreciation

The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.

ARV

After Repair Value - the estimated market value of a property after all renovations and improvements are completed. Calculated by comparing to recently sold comparable properties in the area that are in updated condition. ARV is the foundation of the 70% rule and critical for BRRRR and fix-and-flip strategies.

Asset Management

The strategic oversight of an entire real estate portfolio, including decisions about refinancing, rent optimization, acquisitions, dispositions, and long-term planning. Distinct from property management, which handles day-to-day operations.

Assignment of Contract

A legal mechanism where a buyer transfers their rights under a purchase agreement to a third party before closing. This is the core technique in wholesaling, with the assignor profiting from the difference between contract and assignment price.

Assumable Mortgage

A mortgage that can be transferred to a new buyer along with the property, keeping the original terms and rate. Can be valuable when rates are higher.

AVM

Automated Valuation Model - a technology-driven tool that estimates a property's market value using algorithms, public records, comparable sales data, and market trends. Some lenders accept AVMs instead of full appraisals for lower-risk transactions, which saves borrowers the $300-500 appraisal fee and speeds up the approval process.

B

B Lender

Alternative lenders that serve borrowers who don't qualify with major banks, offering slightly higher rates with more flexible criteria.

Bankruptcy

A legal process where an individual or business declares inability to repay debts. Bankruptcy severely impacts credit scores and mortgage qualification for years, though recovery and re-entry into real estate investing is possible with time and rebuilt credit.

Bank of Canada

Canada's central bank that sets the overnight lending rate, which influences prime rates and mortgage costs across the country. Rate decisions directly impact variable mortgage rates and overall borrowing costs for real estate investors.

Beacon Score

The Canadian credit score produced by Equifax, ranging from 300 to 900. Most Canadian mortgage lenders require a minimum Beacon score of 600-680 for conventional financing, with the best rates available above 720. The Beacon score is similar to the FICO score used in the United States and factors in payment history, credit utilization, length of credit history, and credit mix.

Bare Trust

A legal arrangement where one party holds legal title to a property on behalf of another. In Canadian investing, bare trusts let investors buy property personally for easier mortgage approval while a corporation retains beneficial ownership.

Below-Market Rent

Rental rates lower than comparable properties in the same area. Below-market rents represent a value-add opportunity where an investor can increase property value by raising rents to market levels.

Bird Dogging

The practice of finding undervalued or distressed properties and passing those leads to active investors for a referral fee. Bird dogs do not buy or sell properties themselves, making it a low-capital entry point into real estate.

Blanket Loan

A blanket loan is a single mortgage that finances multiple properties under one loan agreement, allowing Canadian real estate investors to consolidate financing for several investment properties rather than maintaining separate mortgages for each. This can simplify portfolio management and potentially offer better terms, though a release clause is typically negotiated to allow individual properties to be sold without triggering full repayment of the entire loan.

Blanket Mortgage

A single mortgage that covers multiple properties, often used by investors to simplify financing for a portfolio. Allows release of individual properties as they're sold.

Bridge Financing

Short-term financing (90 days to 1 year) that covers the gap between purchasing a new property and selling or refinancing another. Investors use bridge loans to act quickly on deals or fund renovations before long-term financing is in place.

Bridge Loan

A bridge loan is a short-term financing solution that allows Canadian real estate investors to access the equity in their existing property to fund the purchase of a new property before the current one has sold. It "bridges" the gap between the closing date of a new purchase and the sale of an existing property, typically carrying higher interest rates and lasting from a few weeks to several months.

Broker Fees

Broker fees are the commissions or charges paid to a mortgage broker for arranging financing on behalf of a borrower, typically ranging from 0.5% to 2% of the loan amount in Canada, though they may be higher for complex or private lending arrangements. For real estate investors, these fees are a tax-deductible financing cost and are especially common when securing non-traditional mortgages for investment properties that may not qualify through standard lender channels.

BRRRR Strategy

The BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat) is a real estate investment approach where Canadian investors purchase undervalued properties, renovate them to increase value, rent them out, then refinance to pull out equity for purchasing additional properties. This method allows investors to recycle their initial capital across multiple properties, though success depends on finding properties with sufficient value-add potential and meeting Canadian lenders' refinancing requirements, typically requiring a seasoned ownership period.

BRRRR

Buy, Rehab, Rent, Refinance, Repeat - a real estate investment strategy where you purchase a property below market value, renovate it to increase value, rent it out, refinance to pull out your initial investment, and repeat the process with the recovered capital.

Building Permit

Official municipal approval required before conducting certain types of construction or renovation work, ensuring compliance with building codes and safety regulations. Unpermitted work on investment properties can result in fines, required demolition, difficulty selling, and voided insurance claims.

Business Acquisition Financing

Loans used to purchase an existing business, typically qualified based on the business's net operating income and historical financials. Some programs can cover up to 100% of the purchase price for qualified buyers.

Buying Power

Buying power refers to the maximum property value or mortgage amount a real estate investor can qualify for based on their income, credit score, existing debts, and available down payment. For Canadian investors, this determines how much property they can acquire and is directly affected by current interest rates, lending guidelines from OSFI, and stress test requirements.

C

Capital Expenditures

Major one-time expenses for property improvements that extend the useful life of the asset, such as roof replacement, foundation repairs, or new HVAC systems. CapEx differs from regular maintenance and is typically budgeted separately in investment property analysis.

Cap Rate

Capitalization Rate - the ratio of a property's net operating income (NOI) to its current market value or purchase price. A 6% cap rate means the property generates $60,000 NOI annually on a $1,000,000 value. Used to compare investment properties regardless of financing.

Capital Cost Allowance

The Canadian tax deduction that allows property owners to write off the depreciation of a building over time, reducing taxable rental income. CCA cannot be used to create a rental loss and must be recaptured upon sale of the property.

Capital Gains Tax

Tax owed on the profit from selling an investment property, calculated as the difference between the sale price and the adjusted cost base. In Canada, 50% of capital gains are included in taxable income, though recent changes have increased the inclusion rate for amounts over $250,000.

Capitalization

The total value of a property based on its income-producing potential, calculated by dividing NOI by the cap rate. Also refers to the overall investment structure and the amount of debt versus equity used to acquire a property.

Capital Recycling

The strategy of pulling equity out of existing properties through refinancing and redeploying that capital into new acquisitions. Capital recycling is the engine behind scaling a portfolio without fresh savings for every down payment.

Carrying Costs

The ongoing expenses of holding a property, including mortgage payments, property taxes, insurance, utilities, and maintenance. Understanding carrying costs is essential during renovation periods when the property generates no rental income.

Cash Flow

The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.

Cash-on-Cash Return

A metric that measures the annual pre-tax cash flow relative to the total cash invested in a property. Calculated as annual cash flow divided by total cash invested, expressed as a percentage. A 10% cash-on-cash return means you earn $10,000 annually on a $100,000 investment.

Cash-Out Refinance

Refinancing for more than you owe to pull out equity as cash, often used to fund down payments on additional investment properties.

Cash Reserve

Liquid funds set aside by a property investor to cover unexpected expenses such as repairs, vacancy periods, or mortgage payments during tenant turnover. Lenders may require proof of cash reserves as part of mortgage qualification.

Closed Mortgage

A mortgage with restrictions on how much extra you can pay during the term, typically limited to 10-20% of the original balance per year. Prepaying beyond the allowed amount triggers a penalty (usually three months' interest or the interest rate differential). Closed mortgages offer lower rates than open mortgages in exchange for less flexibility.

Closing Costs

Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments.

CMHC Insurance

Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.

CMHC MLI Select

A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.

CMHC

CMHC (Canada Mortgage and Housing Corporation) is a federal Crown corporation that provides mortgage loan insurance to lenders when borrowers have less than a 20% down payment, enabling Canadians to purchase homes with as little as 5% down. For real estate investors, CMHC insurance is available on owner-occupied properties of up to four units, but is generally not available for non-owner-occupied investment properties, meaning investors typically need at least 20% down and must seek conventional financing.

Collateral Mortgage

A mortgage registered for more than the actual loan amount — often up to 125% of the property value. This allows borrowers to access additional funds later without paying for a new registration. Most major Canadian banks use collateral mortgages by default. The trade-off is that switching lenders at renewal typically requires a full discharge and new registration, which adds cost.

Commercial Lending

Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.

Commercial Mortgage

Financing for commercial properties like retail, office, or multifamily buildings with 5+ units, with different qualification criteria than residential mortgages.

Common Area Maintenance

Expenses for maintaining shared spaces in commercial properties, including lobbies, parking lots, landscaping, and hallways. CAM charges are typically passed through to tenants as part of net lease structures.

Comparable Properties

Similar properties in the same market area used to establish fair market value or rental rates through comparison of features, location, condition, and recent sale or rental prices. Analyzing comps is essential when determining offer prices and setting competitive rents.

Condo Fees

Monthly fees paid by condo owners to cover building maintenance, insurance, common area utilities, reserve fund contributions, and amenities. Also known as strata fees or maintenance fees, these directly reduce cash flow and are a critical consideration when analyzing condo investment opportunities.

Condominium

A type of property ownership where an individual owns a specific unit within a larger building or complex, sharing ownership of common areas with other unit owners. Condos offer lower entry prices but come with monthly fees and potential rental restrictions that affect investment returns.

Construction Financing

A short-term loan that funds the building or major renovation of a property, disbursed in stages (draws) as construction milestones are completed. Once building is finished, the construction loan is typically replaced with a permanent mortgage through a process called takeout financing. Interest is charged only on the amount drawn.

Construction Loan

Short-term financing used to fund building a new property. Funds are released in stages (draws) as construction milestones are completed, and interest is charged only on drawn amounts. Construction loans typically convert to permanent financing upon project completion.

Consumer Proposal

A formal legal process in Canada where a debtor negotiates with creditors to repay a portion of outstanding debts as an alternative to bankruptcy. A consumer proposal affects credit reports and mortgage qualification for several years.

Contractor

A licensed professional hired to perform construction, renovation, or repair work on investment properties. Using licensed and insured contractors is essential for permitted work, as unlicensed contractors can result in voided insurance, property liens, and liability for injuries.

Conventional Mortgage

A mortgage with 20% or more down payment, not requiring default insurance. This is the standard financing type for investment properties in Canada, as high-ratio (insured) mortgages aren't available for pure rentals.

Convertible Mortgage

A short-term mortgage (usually 6 months or 1 year) that can be converted to a longer fixed-rate term at any time without penalty. Useful when you expect rates to drop and want to lock in later, or when you need short-term flexibility before committing to a longer term.

Corporate Veil

The legal separation between a corporation and its shareholders protecting personal assets from business liabilities. Courts can pierce the veil when corporate formalities are not maintained or finances are commingled.

Cottage Rental

A vacation property investment in recreational or resort areas. Four-season cottages with year-round activities tend to outperform three-season properties and may be more resilient during economic downturns.

Covenant

A binding agreement or promise in a property deed or loan document. Restrictive covenants limit property use, while loan covenants set conditions borrowers must maintain, such as minimum debt coverage ratios.

Credit Score

A numerical rating (300-900 in Canada) that represents your creditworthiness, affecting mortgage rates and approval. 680+ is typically needed for best rates.

Coverage Ratio

A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.

Credit Union

A member-owned financial cooperative that provides banking services including mortgage lending. Credit unions often have more flexible lending policies for real estate investors than major banks, particularly for borrowers who have exceeded conventional lending limits.

Credit Utilization

The percentage of your available credit that you're using. Keeping this under 30% helps maintain a healthy credit score.

Cross-Border Investing

Cross-border investing refers to Canadian real estate investors purchasing, financing, or managing properties in the United States or other foreign countries, which involves navigating different tax systems, financing requirements, currency exchange risks, and legal frameworks. This strategy allows Canadians to diversify their portfolios geographically and potentially access markets with lower property prices, higher rental yields, or stronger appreciation potential than their domestic market.

Cross-Collateralization

A lending arrangement where equity in one or more properties serves as additional security for a loan on another property. Common in blanket mortgages, it lets lenders use stronger properties to support weaker ones.

Curb Appeal

The visual attractiveness of a property as viewed from the street, which impacts buyer and tenant interest. Strong curb appeal can justify higher rents, reduce vacancy periods, and increase property values through relatively low-cost improvements like landscaping, fresh paint, and exterior maintenance.

Currency Risk

The potential for financial loss from fluctuations in foreign exchange rates. Canadian investors holding US or Mexican properties face currency risk because values and rental income in foreign currencies change in Canadian dollar terms.

D

Days on Market

The number of days a property has been listed for sale or rent without being leased or sold, used as an indicator of market demand and pricing appropriateness. Properties with high days on market typically signal pricing issues or property deficiencies.

Debt Consolidation

Combining multiple debts into a single loan, often through refinancing your mortgage. Can lower overall interest costs and simplify monthly payments.

Debt Ratios

Debt ratios are financial calculations lenders use to determine how much of your income goes toward debt payments, with the two main types being Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. For Canadian real estate investors, these ratios are critical qualifying factors that determine borrowing capacity, with most lenders requiring GDS below 39% and TDS below 44%, though rental income from investment properties can help offset these calculations.

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) measures a property's annual net operating income divided by its total annual mortgage payments, indicating whether rental income can cover debt obligations. Canadian lenders typically require a DSCR of 1.1 to 1.3 or higher for investment properties, meaning the property must generate 10-30% more income than needed to service the debt.

Debt Service Ratio

A broad term for ratios measuring a borrower's ability to service debt. In Canadian residential lending, the key ratios are GDS and TDS. In commercial lending, the DSCR serves a similar function but focuses on property income rather than personal income.

Debt-to-Income Ratio

A lending metric that compares a borrower's total monthly debt payments to their gross monthly income. Lenders use DTI to assess borrowing capacity, with most requiring ratios below 44% for mortgage approval.

Deemed Disposition

A tax event recognized by CRA where property is treated as if sold at fair market value even though no actual sale occurred. Triggered by death, emigration from Canada, or conversion of property use, creating a capital gains tax liability.

Deferred Maintenance

Necessary repairs and maintenance that have been postponed or neglected, creating a backlog of work that will eventually require attention. Properties with significant deferred maintenance can be value-add opportunities for investors willing to address accumulated issues.

Depreciation Report

An engineering study assessing the condition of a building's major components, estimating remaining useful life, and recommending reserve fund contributions. Lenders may decline condo financing without an adequate depreciation report.

Depreciation

An accounting method that allocates the cost of a building over its useful life as a tax deduction. In US real estate, depreciation reduces taxable rental income. The Canadian equivalent is Capital Cost Allowance (CCA).

Down Payment

The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.

Draw Schedule

A plan specifying when and how much of a construction loan's funds will be released as building milestones are reached. An inspector verifies work completion before each draw is disbursed.

DSCR

Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.

DSCR Loan

A loan qualified based on the property's Debt Service Coverage Ratio rather than the borrower's personal income, popular for US investment properties.

Due Diligence

The comprehensive investigation and analysis of a property before purchase, including financial review, physical inspection, title search, and market analysis.

Due-on-Sale Clause

A mortgage provision requiring the borrower to repay the loan in full if the property is sold or transferred. Transferring a property into a corporation may trigger this clause, requiring lender approval or refinancing.

Duplex

A residential property containing two separate dwelling units, either side-by-side or stacked. Duplexes are popular among beginner investors because they can house-hack by living in one unit while renting the other to offset mortgage costs.

Dynamic Pricing

A revenue management strategy where nightly rental rates are adjusted in real time based on demand, seasonality, local events, and competitor pricing. Used by short-term rental operators to maximize revenue.

E

E-2 Visa

An E-2 visa is a U.S. non-immigrant visa that allows citizens of treaty countries, including Canada, to enter and work in the United States based on a substantial investment in a U.S. business. For Canadian real estate investors, this visa can facilitate living in the U.S. while managing significant real estate investments or property-related businesses, though passive real estate investment alone typically does not qualify.

Earnest Money

A deposit made by a buyer to demonstrate serious intent to purchase a property. In wholesaling, earnest money secures the purchase contract. If the deal falls through due to buyer default, the earnest money may be forfeited.

Easement

A legal right to use another person's land for a specific purpose, such as access, utilities, or drainage. Easements transfer with the property and should be identified through title review before purchase.

Ejido Land

Communal agricultural land in Mexico that is collectively owned and cannot be legally sold to foreigners. Investors must verify land classification before purchasing Mexican property to avoid significant legal risk.

Encumbrance

Any claim, lien, charge, or liability attached to a property that may affect its transfer or value. Common encumbrances include mortgages, easements, property tax liens, and restrictive covenants.

Energy Efficiency

The effectiveness with which a property uses energy for heating, cooling, lighting, and other functions. Energy-efficient upgrades to rental properties reduce operating costs, increase NOI, and can add significant property value while qualifying for government rebates.

Environmental Assessment

A professional evaluation of a property's environmental condition, typically required by commercial lenders. Phase I reviews historical records for contamination risk. Phase II involves soil and water testing. Essential for commercial and industrial property purchases.

Equity Multiple

A return metric calculated by dividing total distributions received by total equity invested. An equity multiple of 2.0x means the investor doubled their money over the investment period.

Equity Partner

An equity partner is an individual or entity that contributes capital to a real estate investment in exchange for an ownership stake and a share of the profits, rather than receiving fixed interest payments like a lender. In Canadian real estate investing, equity partners are commonly used to pool resources for purchasing properties that would be unaffordable individually, with profits and losses typically shared in proportion to each partner's contribution or as outlined in a partnership agreement.

Equity Takeout

Accessing the equity in your property through refinancing or a HELOC to use for other investments, renovations, or purposes.

Estate Freeze

A tax planning strategy that locks in the current value of assets for the original owner while transferring future growth to the next generation, minimizing capital gains tax triggered at death.

Estate Planning

The process of anticipating and arranging for the management and disposal of a person's estate during their life and after death, with the goal of minimizing taxes and ensuring a smooth transition for heirs.

Equity

The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, appreciation, and property improvements.

Eviction

The legal process of removing a tenant from a rental property for reasons such as non-payment of rent, lease violations, or property damage. Eviction laws vary by province and typically require landlords to follow specific notice periods and tribunal processes.

Exit Strategy

An exit strategy is a predetermined plan outlining how a real estate investor intends to dispose of or transition out of a property investment to realize profits or minimize losses, such as selling, refinancing, converting to a different use, or transferring to a long-term hold. For Canadian investors, having a clear exit strategy is especially important when dealing with short-term financing like private mortgages or bridge loans, as lenders typically require borrowers to demonstrate a viable plan for repaying the loan within the term.

F

Family Trust

A legal entity that holds assets on behalf of family members. Family trusts enable income splitting and tax-free asset transfers for estate planning, though most lenders are reluctant to finance properties held in family trusts.

Fee Simple

The most complete form of property ownership, granting full rights to use, sell, lease, or bequeath the property indefinitely. In Mexico, foreigners can purchase fee simple outside the restricted zone.

Fideicomiso

A Mexican bank trust allowing foreigners to own property in Mexico's restricted zone within 50 km of coast or 100 km of borders. A Mexican bank holds legal title while the foreign buyer retains full beneficial ownership rights.

FIRPTA

Foreign Investment in Real Property Tax Act - a US tax law requiring buyers to withhold taxes when purchasing real estate from foreign sellers. Important for Canadians selling US properties.

Fix and Flip

Fix and flip is a real estate investment strategy where an investor purchases a property, typically below market value or in need of repair, renovates or improves it, and then resells it quickly for a profit. In Canada, investors pursuing this strategy should be aware that profits are generally taxed as business income rather than capital gains by the CRA, and financing is often arranged through private lenders or alternative mortgage sources since traditional lenders may not fund short-term investment purchases.

Fixer-Upper

A property that needs repairs or renovations, typically priced below market value. Often targeted by investors using BRRRR or fix-and-flip strategies.

Fixed Rate Mortgage

A mortgage where the interest rate stays the same for the entire term, providing predictable monthly payments regardless of market changes.

Forced Appreciation

An increase in property value driven by the owner's actions rather than general market conditions. Strategies include renovations, increasing rents, reducing vacancies, or cutting operating expenses. In commercial real estate, raising NOI directly increases the property's income-based appraised value.

Foreclosure

The legal process by which a lender seizes and sells a property after the borrower defaults on mortgage payments. In Canada, the process varies by province and may include judicial sale or power of sale. Foreclosed properties can offer below-market pricing but carry condition and title risks.

Foreign National Loan

Mortgage programs designed for non-US citizens investing in American real estate, with specific documentation and down payment requirements.

Foreign Tax Credit

A tax credit for income taxes paid to a foreign government. When Canadians earn rental income from US properties, the foreign tax credit prevents double taxation by offsetting Canadian tax by the amount already paid abroad.

Foundation

The structural base of a building that transfers loads to the ground. Foundation issues such as cracks, settling, or water intrusion are among the most expensive repairs in real estate and can significantly impact property value and financing eligibility.

Fourplex

A residential property containing four separate dwelling units. Fourplexes represent the largest property type that typically qualifies for residential mortgage financing, offering strong cash flow potential while avoiding commercial lending requirements.

G

GDS

Gross Debt Service ratio - the percentage of gross income needed to cover housing costs (mortgage, taxes, heating). Maximum typically 39%. For investors, rental income from the property can offset these costs through rental offset calculations.

GP/LP Structure

A General Partner / Limited Partner arrangement used in real estate syndications. The GP manages the project and assumes liability, while LPs invest capital passively with liability limited to their investment amount.

Gross Rent Multiplier

GRM - a property valuation metric calculated by dividing the purchase price by the annual gross rental income. A $500,000 property generating $60,000/year in gross rent has a GRM of 8.3. Lower GRMs generally indicate better value, though the metric doesn't account for operating expenses like cap rate does.

H

Hard Money Loan

A short-term loan from private lenders secured by the property itself rather than the borrower's creditworthiness. Hard money loans offer fast approvals and flexible terms but at higher interest rates, commonly used for fix-and-flip projects and bridge financing.

Heat Pump

An electric heating and cooling system that transfers heat between indoor and outdoor air. Cold-climate heat pumps eliminate carbon tax exposure on heating costs and can significantly reduce operating expenses compared to natural gas furnaces.

HELOC

Home Equity Line of Credit - a revolving credit line secured against your home's equity, allowing you to borrow as needed up to a set limit.

High-Ratio Mortgage

A mortgage with less than 20% down, requiring default insurance. Not available for 1-4 unit investment properties in Canada. However, 5+ unit multifamily can access CMHC MLI Select, and house hackers in owner-occupied 2-4 plexes can use insured financing.

Holding Company

A corporation created to own shares of other corporations or hold assets like investment properties. In real estate, a holding company sits above property-specific corporations, providing liability isolation and tax planning flexibility.

Home Staging

The process of furnishing and decorating a property to maximize its appeal to potential buyers or tenants, typically using neutral colors and strategic furniture placement. Well-staged properties consistently sell faster and at higher prices while attracting better-quality tenants.

House Hacking

Living in one unit of a multi-unit property while renting out the others to offset your mortgage payments and living expenses.

HVAC

Heating, Ventilation, and Air Conditioning systems that control temperature and air quality in buildings. HVAC is often one of the largest energy expenses in rental properties, and upgrading to high-efficiency systems can significantly reduce operating costs and increase NOI.

I

Income Splitting

A tax strategy that distributes income among family members in lower tax brackets to reduce overall family tax burden. In real estate, achieved through corporate structures, family trusts, or spousal loans, subject to Canadian tax restrictions.

Incorporation

The legal process of forming a corporation to own and operate investment properties. Incorporation creates a separate legal entity providing liability protection and tax planning options, but adds complexity and can affect mortgage qualification.

Industrial Property

Real estate used for manufacturing, warehousing, distribution, or storage. Industrial properties often feature long-term net leases with lower management requirements than residential or retail properties.

Insulation

Material installed in walls, attics, and floors to resist heat flow, measured by R-value. Upgrading insulation in older properties reduces heating and cooling costs, improves tenant comfort, and can qualify for government energy rebates.

Insured Mortgage

A mortgage backed by mortgage default insurance from CMHC, Sagen, or Canada Guaranty, required when the down payment is less than 20% on owner-occupied properties. The insurance premium (ranging from 2.8% to 4% of the mortgage) is added to the loan. Insured mortgages qualify for lower interest rates because the lender's risk is covered by the insurer.

Interest-Only Mortgage

An interest-only mortgage allows the borrower to pay only the interest portion of the loan for a set period, typically ranging from five to ten years, after which payments increase to include principal repayment. For Canadian real estate investors, this structure maximizes cash flow during the interest-only period, freeing up capital for other investments or property improvements, though it means no equity is built through payments until the principal repayment phase begins.

Interest Rate

The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.

Internal Rate of Return

A metric used to estimate the profitability of an investment, representing the annualized rate of return at which the net present value of all cash flows equals zero. IRR accounts for the time value of money and is commonly used in development and syndication analysis.

IRD

Interest Rate Differential - a mortgage penalty calculation based on the difference between your rate and current rates for the remaining term.

ITIN

Individual Taxpayer Identification Number - a US tax ID for foreign nationals, required for Canadians to invest in US real estate and file US taxes.

J

Joint Venture

A partnership between two or more parties to invest in real estate, combining capital, expertise, or credit to complete a deal.

L

Landlord Insurance

Specialized property insurance designed for rental properties, covering building damage, liability claims, and optionally loss of rental income during repairs. Landlord insurance differs from homeowner's insurance by addressing the unique risks of tenant-occupied properties.

Land Transfer Tax

A provincial tax paid when purchasing property, calculated as a percentage of the purchase price. Some cities like Toronto add additional municipal tax.

Landlord-Tenant Board

A provincial tribunal or administrative body that resolves disputes between landlords and tenants, handles eviction applications, and enforces residential tenancy legislation. Each Canadian province has its own board or tribunal with specific procedures and timelines.

Laneway House

A small detached dwelling built on an existing residential lot, typically facing a rear lane or alley. Also called garden suites or coach houses, laneway homes increase rental income and property value using existing land and infrastructure.

Lease Agreement

A legally binding contract between a landlord and tenant specifying rental terms including monthly rent, lease duration, responsibilities, rules, and termination conditions. Well-drafted lease agreements protect landlords' interests while complying with provincial residential tenancy legislation.

Lease Option

An agreement giving a tenant the right (but not obligation) to purchase the property at a predetermined price within a specified timeframe while renting.

Lease to Own

A lease to own arrangement allows a tenant to rent a property with an agreement that gives them the option or obligation to purchase it at a predetermined price within a specified period, with a portion of rent payments typically credited toward the purchase price. For Canadian real estate investors, this strategy can generate rental income while securing a future sale price, attract tenants who are more motivated to maintain the property, and provide a solution for buyers who need time to qualify for a mortgage or build a down payment.

Lease-Up Period

The time between when a new or renovated property is ready for tenants and when it reaches stabilized occupancy. During lease-up, the property generates below-target income while carrying full expenses, requiring adequate cash reserves.

Leverage

Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.

Lien

A legal claim against a property used as security for a debt. Liens arise from unpaid mortgages, property taxes, contractor work, or court judgments. Undiscovered liens can eliminate an apparent purchase discount on distressed properties.

LLC

Limited Liability Company - a US business structure commonly used to hold investment properties, providing liability protection and tax flexibility.

Loan-to-Cost Ratio

The percentage of a development project's total cost that a lender will finance. Unlike LTV which compares loan to appraised value, LTC compares loan to actual project costs including land, construction, and soft costs.

LTV

Loan-to-Value ratio - the mortgage amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower). An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV generally means better rates and terms.

M

Market Rent

The rental rate that a property could reasonably command in the current market based on comparable properties, location, and condition. Understanding market rent is essential to maximize income while maintaining competitive positioning and minimizing vacancy.

Market Value

The estimated price a property would sell for on the open market under normal conditions. Determined by comparable sales, location, condition, and market demand.

Maximum Loan Amount

The maximum loan amount is the highest mortgage value a lender will approve for a specific property or borrower, determined by factors such as the property's appraised value, loan-to-value ratio limits, and the borrower's qualification criteria. For Canadian real estate investors, this ceiling is particularly important as investment properties typically face lower LTV limits than owner-occupied homes, often capping at 80% of the property value.

Mezzanine Financing

A hybrid of debt and equity financing that sits between the first mortgage and the borrower's equity in the capital stack. Mezzanine lenders charge higher rates (typically 10-20%) because they are repaid after the first mortgage in a default. Common in commercial real estate and development projects where borrowers need to bridge the gap between their first mortgage and available equity.

Mid-Term Rental

A furnished rental leased for 30 days to 6 months, targeting travel nurses, corporate relocations, and remote workers. Mid-term rentals generate higher revenue than long-term leases with fewer regulatory hurdles than short-term rentals.

Mixed-Use Property

A building that combines residential and commercial uses, such as retail on the ground floor with apartments above. Mixed-use properties can diversify income streams and may qualify for commercial financing terms.

MLI Select

MLI Select is a CMHC mortgage loan insurance program that offers reduced premiums, longer amortization periods (up to 50 years), and higher loan-to-value ratios for multi-unit residential rental properties that meet specific affordability, accessibility, or climate compatibility criteria. For Canadian real estate investors, it provides significant financing advantages when building or purchasing rental properties that align with CMHC's social and environmental goals, effectively lowering costs in exchange for commitments like keeping a portion of units at below-market rents.

Monoline Lender

A financial institution that exclusively originates mortgage loans without offering other banking products. Monoline lenders often provide competitive rates and more flexible investor policies than big banks, accessed through mortgage brokers.

Mortgage Broker

A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.

MLS

Multiple Listing Service - a database used by licensed real estate agents to list properties for sale, providing standardized property information, photos, and pricing. Investors also use off-market strategies to find deals not listed on the MLS.

Mortgage Default

Failure to meet the terms of a mortgage agreement, typically by missing payments. Default can lead to power of sale or foreclosure proceedings, damaged credit, and loss of the property.

Mortgage Insurance Premium

The fee charged by CMHC or other insurers for mortgage default insurance on high-ratio mortgages. The premium is calculated as a percentage of the loan amount and can be added to the mortgage balance or paid upfront.

Mortgage Investment Corporation

A Canadian investment vehicle that pools capital from multiple investors to fund mortgage loans. MICs allow investors to earn returns from mortgage lending without directly originating loans, governed by the Income Tax Act.

Mortgage Penalty

A fee charged for breaking your mortgage early, calculated as either 3 months' interest or the Interest Rate Differential (IRD), whichever is greater.

Mortgage Qualification

Mortgage qualification is the process where a lender evaluates an investor's income, credit score, debt ratios, and financial assets to determine their eligibility for a mortgage and the maximum loan amount they can receive. For Canadian real estate investors, this includes passing the federal stress test at a qualifying rate typically 2% above the contract rate, which directly impacts purchasing power and investment strategy.

Mortgage Stress Test

A federal requirement to qualify at the higher of your contract rate +2% or the benchmark rate (around 5.25%). For investors, rental income can be used to offset this calculation, though lenders typically only count 50-80% of expected rent.

Mortgage Term

The length of time your mortgage contract and interest rate are in effect. Typically ranges from 1 to 5 years in Canada, after which you renew or refinance.

Multifamily Financing

Multifamily financing refers to mortgage loans specifically designed for purchasing or refinancing residential properties with five or more units, such as apartment buildings or large rental complexes. For Canadian real estate investors, these commercial-style loans typically require larger down payments and are evaluated primarily on the property's rental income and net operating income rather than personal income alone.

Multifamily

Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.

N

Net Lease

A commercial lease where the tenant pays some or all operating expenses (taxes, insurance, maintenance) in addition to base rent. Variations include single net (N), double net (NN), and triple net (NNN) leases, shifting cost risk from landlord to tenant.

Net Worth Statement

A financial document listing all assets and liabilities to calculate total net worth. Commercial and portfolio lenders often require this as part of mortgage applications, using total equity across all properties as a qualification factor.

NOI

Net Operating Income - the total income a property generates minus all operating expenses, but before mortgage payments and income taxes. Calculated as gross rental income minus vacancies, property taxes, insurance, maintenance, and property management fees.

Non-Recourse Loan

A loan secured only by the property itself, with no personal liability for the borrower beyond the collateral. In Canada, non-recourse lending is typically available only for large institutional deals or CMHC-insured multifamily mortgages.

Notario

In Mexico, a licensed public official who authenticates real estate transactions, collects taxes, and ensures legal compliance. A notario is not an independent attorney; investors should hire their own lawyer separately.

Notice of Assessment

A document issued by the CRA after processing a tax return, confirming income reported and taxes owed or refunded. Mortgage lenders require Notices of Assessment as proof of declared income, especially for self-employed borrowers.

O

Occupancy Rate

The percentage of rental units that are currently occupied by paying tenants, calculated as occupied units divided by total available units. High occupancy rates indicate strong property management and market demand, while low rates signal problems that reduce cash flow.

Open Mortgage

A mortgage that can be paid off in full or in part at any time without penalty. Open mortgages carry higher interest rates than closed mortgages to compensate for this flexibility. They're useful for borrowers who expect to sell soon, receive a lump sum, or refinance in the near term.

Off-Market Deals

Off-market deals are properties sold privately without being listed on MLS or public platforms, typically found through direct outreach to owners, networking, or wholesalers. For Canadian investors, these transactions can offer reduced competition and potentially better pricing, though they require more active sourcing and careful due diligence without the transparency of listed sales.

Operating Expenses

The ongoing costs of running a rental property, including property taxes, insurance, maintenance, property management fees, utilities, and repairs. Subtracting operating expenses from gross rental income yields the net operating income.

P

Parental Guarantor

A parent who co-signs a lease on behalf of their child, becoming legally responsible for rent payments and property damage. Requiring parental guarantors is a key risk mitigation strategy in student rental investing.

Passive Income

Earnings from rental properties or investments that require minimal day-to-day involvement. The goal of most real estate investors seeking financial freedom.

Plumbing

The system of pipes, drains, fixtures, and fittings in a building that distributes water and removes waste. Plumbing issues are among the most costly repairs in rental properties, and older galvanized or polybutylene pipes often need replacement during renovations.

Portfolio Investor

A portfolio investor is a lender, often a credit union or private institution, that funds mortgages using their own capital and keeps the loans on their books rather than selling them to insurers like CMHC. For Canadian real estate investors, portfolio lenders are valuable because they often have more flexible qualification criteria and can approve deals that traditional banks following strict insurer guidelines would decline.

Portfolio Lender

A financial institution that keeps mortgage loans on its own books rather than selling them to insurers or the secondary market. Portfolio lenders offer more flexible qualification criteria, making them valuable for investors who have exceeded conventional lending limits.

Porting

Transferring your existing mortgage to a new property without penalty, keeping your current rate and terms. Useful when moving before your term ends.

Power of Sale

A clause in Canadian mortgages allowing the lender to sell a property without court involvement after the borrower defaults. Used in Ontario and some other provinces as a faster alternative to judicial foreclosure.

Pre-Approval

A conditional commitment from a lender stating your borrowing capacity, valid for 90-120 days. For investors, getting pre-approved helps you move quickly on deals and shows sellers you're a serious buyer with financing in place.

Pre-Construction

The purchase of a property before or during its construction phase, typically from a developer. Pre-construction purchases may offer built-in equity if values appreciate by completion, but carry completion risk including delays and developer insolvency.

Prime Rate

The benchmark interest rate set by banks, which influences variable mortgage rates. It typically follows the Bank of Canada's overnight rate.

Principal Residence Exemption

A Canadian tax provision eliminating capital gains tax on the sale of a property designated as the owner's principal residence. Strategic designation across multiple properties can significantly reduce lifetime tax liability.

Prepayment Privileges

Terms in your mortgage that allow extra payments without penalty, typically 10-20% of the original balance annually. Helps pay off your mortgage faster.

Principal

The original amount of money borrowed on a mortgage, not including interest. Each mortgage payment includes both principal (paying down what you owe) and interest (the cost of borrowing). Over time, more of each payment goes toward principal as the loan balance decreases.

Private Lending

Private lending involves obtaining mortgage financing from individual investors or non-institutional lenders rather than banks or credit unions, typically at higher interest rates but with more flexible qualification criteria. For Canadian real estate investors, private lenders offer a valuable alternative funding source for deals that may not meet traditional lending requirements, such as properties needing significant renovation or situations requiring fast closing timelines.

Private Mortgage Rate

A private mortgage rate is the interest rate charged by non-institutional lenders such as individuals or private lending companies, typically ranging from 8% to 18% in Canada, and is significantly higher than bank rates to compensate for the increased risk of lending to borrowers who may not qualify for conventional financing. For Canadian real estate investors, private mortgages can provide short-term bridge financing or fund deals quickly when traditional lenders decline, but the higher carrying costs must be carefully factored into investment returns.

Private Mortgage

A mortgage from a private lender rather than a traditional bank, typically with higher rates but more flexible qualification requirements.

Pro Forma

A projected financial statement for an investment property showing expected income, expenses, and returns. Pro formas are used to evaluate potential acquisitions and are required by many commercial lenders during underwriting.

Probate

The legal process of validating a deceased person's will and distributing their estate. Properties held personally must go through probate, causing delays and costs. Corporate or trust structures can bypass probate.

Property Inspection

A professional examination of a property's physical condition, including structural elements, mechanical systems, roofing, and other components, typically conducted before purchase. Thorough inspections help investors identify problems, estimate repair costs, and negotiate purchase prices.

Property Management

The operation, control, and oversight of real estate by a third party. Property managers handle tenant screening, rent collection, maintenance, and day-to-day operations.

Property Manager

A property manager is a professional or company hired by a real estate investor to handle the day-to-day operations of a rental property, including tenant screening, rent collection, maintenance, and ensuring compliance with provincial landlord-tenant legislation. For Canadian investors, using a property manager is especially common when owning multiple properties or investing in markets outside their home province, with management fees typically ranging from 5% to 10% of collected rent.

Property Tax Assessment

The process by which a municipality determines the value of a property for taxation purposes. Investors can appeal assessments they believe are too high, potentially reducing annual property tax expenses and improving cash flow.

Property Tax

Annual tax levied by municipalities on real estate based on the assessed value of the property. Property taxes fund local services and are a significant operating expense that investors must account for in cash flow projections.

Purchase Plus Improvements

A Canadian mortgage program that combines the purchase price with renovation costs into a single mortgage, based on the property's after-improvement value.

R

Raw Land

Undeveloped property without buildings, utilities, or infrastructure. Raw land investments offer potential for development or appreciation but generate no rental income and can be difficult to finance through traditional lenders.

Rate Hold

A commitment from a lender to guarantee a specific mortgage interest rate for a set period, typically 90 to 120 days. Rate holds protect borrowers from increases while searching for a property or completing a purchase.

Real Estate Agent

A licensed professional who represents buyers or sellers in real estate transactions, providing market expertise, negotiation skills, and access to the MLS. Working with an investor-friendly agent who understands rental property analysis and financing strategies can significantly impact deal quality.

Recapture

The inclusion of previously claimed Capital Cost Allowance (CCA) in income when a depreciable property is sold for more than its undepreciated capital cost (UCC).

Recourse Loan

A loan where the borrower is personally liable for repayment beyond the collateral value. If the property sells for less than owed at foreclosure, the lender can pursue the borrower's other assets. Most Canadian commercial mortgages under $5 million are full recourse.

Refinance

Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.

REIT

Real Estate Investment Trust - a company that owns, operates, or finances income-producing real estate, allowing investors to buy shares and earn returns without directly managing properties. REITs must distribute most of their taxable income as dividends.

Relationship Banking

A lending approach where borrowers cultivate long-term partnerships with financial institutions. At scale, relationship banking provides better rates, faster approvals, and creative deal structuring.

Release Clause

A provision in a blanket mortgage allowing the borrower to remove an individual property from the loan without refinancing the entire portfolio. Essential when planning to sell individual properties from a bundled mortgage.

Rent Control

Provincial regulations that limit how much a landlord can increase rent annually for existing tenants. Rules vary by province - Ontario caps increases at a government-set guideline, while Alberta has no rent control. Rent control directly impacts investment cash flow projections.

Rent Increase

The process of raising rental rates for existing or new tenants. In provinces with rent control, annual increases for existing tenants are capped at government-set guidelines, while new tenancies can often be set at market rates.

Rent Roll

A document listing all rental units in a property, including tenant names, lease terms, and rent amounts. Essential for verifying income during due diligence.

Rent-to-Own

An arrangement where a tenant rents a property with an option to purchase it at a predetermined price within a specified timeframe. A portion of rent payments may be credited toward the eventual purchase price.

Rental Income

Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.

Rent-to-Price Ratio

A metric comparing monthly rental income to a property's purchase price, expressed as a percentage. A higher ratio indicates stronger cash flow potential. Used to quickly screen properties and markets for investment viability.

Rental Offset

Using a percentage of rental income (typically 50-80%) to help qualify for a mortgage by offsetting property carrying costs.

Rental Worksheet

A Rental Worksheet is a standardized form used by Canadian lenders to calculate the net rental income from an investment property, typically accounting for a vacancy allowance and operating expenses to determine how much rental revenue qualifies toward mortgage approval. This document helps investors demonstrate their property's cash flow when applying for financing on rental properties.

Rental Application

A standardized form completed by prospective tenants providing personal information, employment details, rental history, and references used for tenant screening. Consistent use of rental applications helps landlords apply fair screening criteria and comply with fair housing requirements.

REO Property

Real Estate Owned - property repossessed by a lender after a failed foreclosure auction. Banks are motivated to sell REO properties quickly, which can create opportunities for investors willing to deal with condition issues.

Restricted Zone

In Mexican property law, land within 50 km of coastline and 100 km of international borders where foreigners cannot directly own real estate. Foreign buyers must use a fideicomiso or Mexican corporation.

Reserve Fund

Money set aside by a condo corporation or property owner for future major repairs and capital expenditures like roof replacement, building envelope repairs, or mechanical system upgrades. A well-funded reserve indicates responsible financial management and reduces the risk of special assessments.

Right of First Refusal

A contractual right giving a party the first opportunity to purchase a property before the owner can sell to someone else. Common in joint venture agreements and some commercial leases.

ROI

Return on Investment - a measure of profitability calculated by dividing net profit by total investment. Used to compare the efficiency of different investments.

Roof Replacement

A major capital expenditure involving the complete removal and installation of a new roofing system. Roof age and condition are critical factors in property inspections, insurance eligibility, and financing approvals, with typical costs ranging from $5,000 to $30,000+ depending on property size.

Room Rental

A strategy where individual rooms within a property are leased separately to different tenants rather than renting the entire unit. Room rentals generate higher per-property revenue but require more management and may have specific zoning and financing considerations.

S

Second Mortgage

A subordinate loan taken against a property that already has a first mortgage. Second mortgages have higher interest rates due to increased lender risk and can be used to access equity without refinancing the first mortgage.

Secondary Suite

A self-contained rental unit within or attached to a single-family home, such as a basement apartment, laneway house, or garden suite. Secondary suites help investors generate additional rental income from one property and can qualify for rental offset programs that improve mortgage qualification.

Security Deposit

Money collected from tenants at the beginning of a lease to cover potential damages beyond normal wear and tear or unpaid rent at lease end. Security deposit rules vary by province, with some jurisdictions limiting amounts and requiring deposits to be held in trust.

Seller Financing

A financing arrangement where the property seller acts as the lender, allowing the buyer to make payments directly to them instead of obtaining a traditional mortgage.

Shareholder Agreement

A contract between shareholders of a corporation defining rights, responsibilities, profit sharing, dispute resolution, and exit terms. Essential when multiple investors hold shares in a real estate holding corporation.

Short-Term Rental

A furnished property rented for periods shorter than 30 days through platforms like Airbnb or VRBO. Short-term rentals generate higher gross revenue but carry higher operating costs and stricter municipal regulations.

Single Family

A detached home designed for one household, the most common property type for beginner real estate investors.

Smith Manoeuvre

A Canadian tax strategy that converts non-deductible mortgage interest into tax-deductible investment loan interest over time.

Special Assessment

A one-time charge levied by a condo corporation on unit owners to cover major repairs or expenses not adequately funded by the reserve fund. Special assessments can range from a few thousand to tens of thousands of dollars per unit and represent a significant cash flow risk for investors.

Stabilized Property

A rental property that has reached its target occupancy level and is generating consistent, predictable income. Lenders and appraisers value stabilized properties more favorably than those in lease-up or transition.

Stated Income

A mortgage program where income is stated rather than fully documented, designed for self-employed borrowers with complex income situations.

Status Certificate

A legal document issued by a condominium corporation disclosing the building's financial health, reserve fund status, pending assessments, litigation, and rental restrictions. Lenders require this before approving condo financing.

STR

Short-Term Rental - a furnished property rented for periods of less than 30 days, typically through platforms like Airbnb or VRBO. STRs can generate 2-3x the income of long-term rentals but require more active management, higher operating costs, and compliance with local short-term rental regulations.

Strata Corporation

The governing body of a condominium building responsible for managing common property, collecting fees, maintaining reserve funds, and enforcing bylaws. The financial health of a strata corporation directly affects unit values and financing eligibility.

Student Rental

A rental property near a college or university leased to students, typically on a per-room basis. Student rentals generate higher cash flow than traditional single-family rentals because rent is collected per bedroom rather than per unit, with risk mitigated through parental guarantors.

Subject-To

A creative acquisition strategy where you take ownership of a property while the seller's existing mortgage stays in place. You make the payments, but the loan remains in the seller's name.

Succession Planning

The process of preparing for the eventual transfer of a real estate portfolio to heirs, partners, or professional managers. Includes documentation, insurance planning, legal structuring through wills and trusts, and gradual transition of operational responsibility.

Syndication

Pooling capital from multiple investors to purchase larger properties, typically structured with general partners (operators) and limited partners (investors).

T

Tax Deferral

A strategy that postpones payment of taxes to a future date. In Canadian real estate, holding properties in a corporation creates tax deferral because corporate tax rates are lower than top personal rates. Deferred tax becomes payable when funds are distributed to shareholders.

Takeout Financing

Permanent long-term mortgage financing that replaces a short-term construction loan after a development project is completed and stabilized. Securing a takeout commitment before construction begins reduces project risk.

Tax Shelter

A legal strategy or investment that reduces taxable income. Real estate is one of the most effective tax shelters due to deductions like mortgage interest, depreciation (CCA), operating expenses, and capital gains deferrals.

TDS

Total Debt Service ratio - the percentage of gross income needed to cover all debt payments. Maximum typically 44%. Investors can use rental income (50-80% offset) to help qualify, making it possible to scale a portfolio despite existing debts.

Tenant Improvement

Modifications made to a commercial rental space to meet a tenant's specific needs, often funded by the landlord as an incentive. TI allowances are a standard part of commercial lease negotiations.

Tenant Screening

The process of evaluating prospective tenants through credit checks, employment verification, rental history reviews, and reference checks. Thorough screening is the most effective way landlords can prevent costly problem tenancies and reduce turnover.

Title Insurance

Insurance that protects against losses from defects in title to a property, such as liens, encumbrances, or ownership disputes.

Townhouse

A multi-story residential unit that shares one or more walls with adjacent units but has its own entrance. Townhouses offer a middle ground between condos and detached homes, often with lower purchase prices and condo-like fee structures.

Traditional Lender

A traditional lender is a federally or provincially regulated financial institution, such as a major bank or credit union, that offers mortgage financing with standardized qualification criteria including stress tests, income verification, and typically the most competitive interest rates. For Canadian real estate investors, traditional lenders usually offer the best rates but impose stricter requirements around debt service ratios and the number of financed properties allowed, which can limit portfolio growth.

Triple Net Lease

A commercial lease (also called NNN) where the tenant pays base rent plus all three major operating expenses: property taxes, insurance, and maintenance. The landlord receives predictable net income with minimal management responsibility. Common in retail, industrial, and single-tenant commercial properties.

Turnkey Property

An investment property that's fully renovated and often already tenanted, ready to generate income immediately after purchase.

Turnover

The process and cost of preparing a rental unit for a new tenant after the previous tenant moves out, including cleaning, repairs, marketing, and vacancy time. High turnover rates significantly reduce profitability through lost rent and preparation expenses.

Triplex

A residential property containing three separate dwelling units. Triplexes offer higher rental income potential than duplexes while still qualifying for residential mortgage financing in most cases, making them attractive to growing investors.

U

Underwriting

The process lenders use to evaluate the risk of a mortgage application, including reviewing credit, income, assets, and property value to determine loan approval.

Uninsured Mortgage

A mortgage without government-backed default insurance, required when the down payment is 20% or more, or for investment properties and refinances. Uninsured mortgages typically carry slightly higher interest rates than insured ones because the lender bears the full default risk. Most investment property mortgages in Canada are uninsured.

V

Vacancy Rate

The percentage of rental units that are unoccupied over a given period. A critical factor in cash flow analysis, typically estimated at 4-8% for conservative projections.

Value-Add Property

A property with potential to increase value through renovations, better management, rent increases, or adding units.

Variable Rate Mortgage

A mortgage where the interest rate fluctuates with the prime rate, meaning your payments or amortization can change over time.

Vendor Take-Back

A Canadian term for seller financing where the vendor (seller) provides a mortgage to the buyer for part of the purchase price, often used to bridge financing gaps.

VTB

An abbreviation for Vendor Take Back mortgage, where the seller of a property provides financing to the buyer to facilitate the sale.

W

Wholesaling

A real estate investment strategy where an investor contracts to buy a property and then assigns that contract to another buyer for a fee, without ever taking ownership. Wholesaling requires minimal capital but significant marketing and negotiation skills.

Z

Zoning

Municipal regulations that dictate how properties in specific areas can be used, including residential, commercial, industrial, or mixed-use designations. Zoning bylaws affect what investors can do with properties, including rental restrictions, multi-unit conversions, and home-based businesses.

#

1% Rule

A quick screening formula where the monthly rent should equal at least 1% of the purchase price. A $200,000 property should rent for $2,000/month to pass the test. It's a rough filter for cash flow potential — not a substitute for full analysis, but useful for quickly eliminating poor deals.

100% Financing

A mortgage structure where no down payment is required from the borrower's personal funds. In Canada, this is available for owner-occupied commercial properties through CMHC programs and for residential purchases using gifted down payments, borrowed down payments (where permitted), or vendor take-back mortgages combined with a first mortgage.

1031 Exchange

A US tax provision allowing investors to defer capital gains taxes by reinvesting proceeds from a property sale into a like-kind replacement property within specific timeframes. Not available in Canada, but relevant for Canadians investing in US real estate.

70% Rule

A fix-and-flip guideline stating you should pay no more than 70% of a property's after-repair value (ARV) minus renovation costs. On a home with a $300,000 ARV and $50,000 in repairs, your max purchase price would be $160,000. This margin accounts for holding costs, selling costs, and profit.

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