Landlord Lingo 101: Mastering the Basics with 101 Essential Terms
Landlord Dictionary:
Being a landlord is more than collecting rent checks—it’s a new world of lingo you never knew you needed! And if you’re new to the world of landlording (that’s a word, right?) or property management you don’t want to slow down to Google the words you aren’t quite sure you understand.
Here’s my introduction to
Property Management
in 101 Words.
Abandonment: When a tenant leaves the rental property without notifying the landlord and shows no intention of returning. It can be tricky to determine if a tenant has really abandoned the apartment. Check to see if utilities have been turned off and if the apartment is empty of personal belongings. Have you tried to call the tenant and their emergency number? Before changing the locks, throwing personal items away, or re-renting the apartment you must confirm absolutely that the apartment is truly abandoned.
Assignment of Lease: When a tenant transfers their lease obligations to another tenant. This is not something I recommend you allow your tenants to do unless you thoroughly screen the new tenant.
ADA (Americans with Disabilities Act): A federal law that ensures people with disabilities are not discriminated against and that properties are accessible to all.
Affordable Housing: Housing that is regulated by government agencies to keep rent prices manageable for people who meet specific income or eligibility criteria.
Amenities: Features or services that add value or make a rental property more attractive to tenants, such as a pool, gym, bike storage, or any other desirable added features. The right amenities add value to your property, the wrong features cost you money and won’t entice tenants to rent from you.
Application Fee: A fee paid by a prospective tenant to apply for a rental property. The fee usually covers the cost required to process the application; this includes items such as the criminal background check and the credit report.
Appraisal: An evaluation of the property’s value conducted by a professional appraiser.
Background Check: A screening process that includes checking a tenant’s criminal, credit, and rental history. This is done to ensure that you are selecting a quality tenant. Do not let tenants move in without conducting a background check.
Breach of Lease: When either the tenant or the landlord fails to uphold their obligations under the lease. This can result in the termination of the lease agreement.
Broker: A licensed real estate professional who helps buy or sell property on behalf of others and earns a commission for their services.
Capital Expenditure (CapEx): Money spent on long-term improvements or upgrades to the property.
CAP Rate (Capitalization Rate): A metric used to estimate the potential return on a real estate investment, calculated by dividing the property's net operating income by its current market value.
Cash for Keys: An arrangement where the landlord offers to pay the tenant to voluntarily move out. Often times this is done to avoid a lengthy and costly eviction process or to give the landlord possession of the rental unit to renovate.
Common Area: Shared spaces in a rental property, such as hallways, laundry rooms, or courtyards.
Condominium (condo): A building with individual units that are owned by the residents, while common areas and amenities are shared and jointly owned. If you purchase a condo as an investment property be sure to factor your condo fees into your monthly expenses.
Co-Signer: A co-signer is someone who signs the lease or mortgage with the primary tenant or borrower, agreeing to step in and cover the payments if the main person can't fulfill their financial responsibilities.
Credit Check: A credit check looks at a tenant’s financial history to see how responsible they are with money. It’s important to set your criteria for what’s acceptable, whether it’s a minimum credit score, specific accounts you’ll consider, or their debt-to-income ratio—or a combination of these. Whatever you decide, be consistent with every applicant to ensure you follow Fair Housing regulations and treat everyone fairly.
Curb Appeal: The attractiveness of a property’s exterior as seen from the street. This is a very important piece of your property, especially when you’re trying to rent it out.
Default: When a tenant fails to meet their responsibilities, like paying rent on time, it’s considered a default. This can lead to legal actions if the issue isn’t resolved.
Default Judgment: This is a legal ruling that automatically favors the landlord when a tenant doesn’t respond to a lawsuit, such as an eviction case. It means the court can make a decision without hearing the tenant’s side, typically granting the landlord the right to take further action.
Depreciation: Over time, the value of a property naturally decreases due to wear and tear, age, or other factors. As a landlord, you can use this depreciation to your advantage by claiming it as a tax deduction, which helps lower your taxable income and reduce the amount you owe at tax time.
Duplex: A single building divided into two separate units, typically with one family or tenant living on each floor or side. Purchasing a duplex in order to live in one side and rent out the other side is a great way to become a landlord!
Easement: A legal right for someone to use part of a property for a specific purpose, such as access.
Escrow: A legal arrangement where a neutral third party temporarily holds funds until specific conditions are met. In the case of tenants withholding rent due to unresolved maintenance issues, the tenant may place the rent payments in an escrow account. This ensures that the tenant is fulfilling their obligation to pay rent while giving the landlord an incentive to address the repairs. Once the issues are resolved, the funds are released to the landlord. It’s important to note that tenants cannot simply stop paying rent without taking this legal step.
Equity: The difference between a property's market value and the outstanding mortgage balance; the amount the owner would receive after paying off the loan.
Eviction: The legal process of removing a tenant from a rental property. You do not want to have to evict a tenant because it can take a lot of time and money to complete the process. The best way to avoid tenant evictions is to choose tenants wisely!
Eviction Notice: A formal notice from the landlord informing the tenant of a lease violation and the potential for eviction if the issue is not resolved.
Fair Credit Reporting Act (FCRA): A federal law regulating how landlords can use credit reports in tenant screening. Be sure to be familiar with regulations centered around using credit reports and credit history when selecting tenants.
Fair Housing Act: A U.S. law that prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, or disability. Be aware of any other protected class that your state may have added to this list. Examples could include, sexual orientation, gender identity, source of income, etc…
Fixed Expense: A recurring cost that remains constant regardless of whether the property is occupied, such as property taxes or insurance.
Gross Rent: The total rent amount paid by the tenant, including base rent and additional fees.
Foreclosure: The legal process in which a lender takes possession of a property due to the owner’s failure to make mortgage payments.
Habitable: A legal requirement for rental properties to be in livable condition, with access to utilities, plumbing, and heat. If your apartment is “non-habitable” your tenant may put their rent in escrow, you may have to provide a hotel room, or any number of other things could happen. Your base requirement as a landlord is to provide a habitable place to live for the tenants who are paying you rent.
Holding Deposit: A deposit paid to hold a rental unit until a lease is signed. It is common for landlords to collect this deposit but check your state laws before doing so because many states either prohibit this practice or place limits on what you’re permitted to collect.
Homeowners Association (HOA): An organization made up of homeowners in a condo complex or planned community that sets and enforces rules and guidelines for the property.
Housing and Urban Development (HUD): HUD is the U.S. Department of Housing and Urban Development. The department focuses mainly on increasing the rate of homeownership and access to affordable housing.
Investment Property: A property purchased with the intent of generating income through renting to tenants or future resale.
Joint and Several Liability: A legal concept where multiple tenants are equally responsible for the full rent and damages. Make sure to have a Joint and Several clause in your lease agreement. This way if you have roommates who usually pay separately and one doesn’t have rent money for the month you can hold them all responsible -making is more likely that you’ll be paid your rent every month.
Landlord: The owner of a rental property.
Landlord Insurance: A type of insurance that protects landlords from financial losses related to their rental property, such as damage from fire or theft, with optional coverage for rent guarantee and legal expenses.
Landlord-Tenant Law: A section of law that defines the rights and responsibilities of both landlords and tenants, such as the landlord’s duty to provide possession of the property and the tenant’s duty to maintain the premises.
Late Fee: A penalty charged to tenants for not paying rent on time. If you plan to charge a late fee (and you should) you should add a clause to your lease agreement specifying what you will charge and when. Charge this every single time and you will train your tenant to pay on time and without waiting for you to call and request rent.
Late Notice: A written notice sent to a tenant when rent is not paid on time. As with the late fee, always be sure to send a written notice if your tenant pays late.
Lead-Based Paint Disclosure: A regulation requiring landlords to inform tenants about the presence of lead-based paint in homes built before 1978 to ensure safety and compliance with the law. If your rental property was built prior to 1978 you must be familiar with Lead-Based Paint Laws. Start by looking at the EPA website, Lead Laws and Regulations | US EPA, but also be sure to check out specific laws in your state since many have additional requirements.
Lease: The legal contract between a landlord and tenant outlining the rental agreement. Do not let a tenant/resident step foot into your property without a signed lease agreement. -This goes for friends and family too!
Lease Buyout: When a landlord pays a tenant to terminate the lease early.
Lease Renewal: The extension of an existing lease agreement for another term. Often this is the time a landlord increases rent since the first term is over. Before increasing rent, take a look at the market rents in your area to ensure you’re making the right offer. Be sure to offer your quality tenants a lease renewal well before the current lease expires. You want to keep the good ones!
Lease Term: The length of time the lease is in effect.
Leasing Agent: A professional who handles the leasing of real estate properties and signs lease agreements on behalf of the property owner (lessor).
Lessee: A person who rents a property from a landlord, also known as the tenant or resident.
Lessor: The property owner, or landlord, who grants a lease to the tenant (lessee).
Liability Insurance: Insurance that protects the landlord from claims or lawsuits if someone is injured on the property.
Long-Term Rental: A rental agreement that lasts for one year or longer.
Maintenance: The ongoing care and repair of your rental property to keep it in good condition. This includes everything from routine tasks like lawn care and cleaning common areas to fixing leaky faucets or addressing more significant repairs. Staying on top of maintenance not only keeps your property looking great but also helps prevent bigger, more costly problems down the road, ensuring a safe and comfortable home for your tenants.
Market Rent: This is the amount you can realistically charge for your rental property based on what similar properties in your area are going for. It’s determined by the current demand for rentals, the supply of available units, and the features your property offers. Setting the right market rent is key to attracting good tenants while ensuring you're getting the most out of your investment.
Month-to-Month Lease: A flexible rental agreement that automatically renews at the end of each month, giving both you and your tenant the freedom to adjust the terms or end the lease with proper notice. It’s great for tenants who need short-term housing and for landlords who want the option to change rent or find new tenants more easily. However, it’s important to remember that this flexibility goes both ways, so staying in communication with your tenant is key.
Mortgage: A mortgage is a loan you take out to buy a property, where you agree to pay back the money in regular installments over time. In exchange, the lender holds the property as collateral, meaning they have the right to take it back if the loan isn’t repaid according to the agreed terms. It’s a major financial commitment, but it allows you to own a home or investment property without paying the full price upfront.
Move-In Inspection: A detailed walkthrough of the rental property that you and your tenant do together when they move in. This inspection helps document the current condition of the property, noting any existing damage or issues. It’s a key step to protect both you and your tenant, as it ensures there's a clear record of how things look at the start of the lease. That way, when it’s time for them to move out, you can fairly assess any new damage and avoid disputes over the security deposit.
Move-Out Inspection: A final walkthrough of the property is conducted after a tenant moves out to check for any damage beyond normal wear and tear. This inspection helps you compare the condition of the property to how it was at move-in, ensuring any damages are properly documented. It’s an important step for determining if deductions from the security deposit are necessary and for making sure the property is ready for the next tenant.
Multi-Family Home: A building that contains more than one rental unit, such as a duplex or apartment complex.
Net Operating Income (NOI): This is the income you have left from your rental property after you’ve paid for all the regular operating expenses, like maintenance, insurance, property taxes, and utilities. Essentially, it’s the profit your property generates before any mortgage payments or other financing costs are factored in. Knowing your NOI gives you a clear picture of how well your property is performing and helps you make smarter financial decisions.
Notice to Enter: A written notice from the landlord informing the tenant of their intent to enter the property for maintenance or inspection.
Notice to Vacate: A written notice from the landlord or tenant that they intend to terminate the lease. Be sure to note the amount of time you require your tenant to give when vacating. You want as much notice as possible so make sure you know any laws in your state and also what your market will allow.
Operating Budget: A financial plan predicting the property’s income that is balanced by various expenses over a period of one year.
Operating Expenses: These are the regular, ongoing costs associated with managing and maintaining a rental property. Operating expenses typically include things like property maintenance, repairs, utilities, property management fees, insurance, property taxes, and advertising for tenants. They do not include mortgage payments or major capital improvements. Landlords can often deduct operating expenses from their rental income for tax purposes, helping reduce their taxable income.
Notice of Non-Renewal: A written notice that the lease will not be renewed at the end of the term. This can be an effective way to remove an unwanted tenant, but be sure to check with your state laws to ensure that you are terminating the lease properly. Many states do not permit sending a notice of non-renewal without “cause”.
Pest Control: The management of pests such as insects or rodents in a rental property.
As a landlord, you must provide pest control if an infestation occurs. -If the problem is caused by the tenant you can bill them back for the service.
Pet Deposit: A separate deposit paid by the tenant to cover potential damages caused by their pets. This gives landlords an extra financial cushion for repairs if needed. However, it's important to understand the laws in your state regarding deposits. In some states, the total deposit—including the pet deposit—cannot exceed the equivalent of one month's rent. Be sure to check your local regulations.
Property Management: This involves handling the day-to-day operations of a rental property on behalf of the owner. It includes tasks like finding and screening tenants, collecting rent, coordinating maintenance, and ensuring the property stays in good condition. As a property manager, you're the owner's eyes and ears, making sure everything runs smoothly, tenants are happy, and the property is well-maintained, all while protecting the owner’s investment.
Property Management Agreement: A formal contract between a landlord and a property management company that outlines the specific services the manager will provide, their responsibilities, and the agreed-upon payment terms. This agreement ensures both parties are clear on what’s expected, from rent collection and tenant relations to property maintenance and financial reporting, providing a solid framework for a successful working relationship.
Property Manager: A person managing a real estate property that belongs to someone else. Property managers get compensated for dealing with accounting, maintenance, and rent collection among other duties.
Property Tax: Taxes assessed on real estate by the local government.
Profit and Loss Statement: A financial report generated on an annual basis that shows the real net profit before any taxes.
Quiet Enjoyment: This is the tenant’s legal right to peacefully use and enjoy the rental property without unnecessary interference from the landlord or anyone else. It means the tenant can live in the home without disturbances, such as unwarranted entry by the landlord, excessive noise, or disruptions from neighbors. As a landlord, it’s important to respect this right while still fulfilling your responsibilities.
Real estate: A portion of land that may or may not have attached permanent structures, such as buildings.
Real Estate Agent: A licensed professional who helps people navigate the process of leasing or selling properties.
Rent: Payment made by a tenant to a landlord for the use of property.
Rent Abatement: A reduction or suspension of rent due to property issues like repairs or habitability problems.
Rent Concession: A discount or reduction in rent offered by the landlord to attract tenants.
Rent Control: Government-imposed limits on the amount of rent a landlord can charge. Be sure to know if you have a property in a rent-controlled area!
Rent Control Board: A local government agency that regulates rent increases and enforces rent control laws.
Rent Escalation: Rent escalation is a clause in the lease that allows for rent adjustments, typically increasing after a set time or when specific conditions are met, ensuring the landlord can keep up with market changes or rising costs.
Rent Roll: a detailed record that tracks all tenants, the amount of rent each one pays, and when it's due, helping landlords stay organized and keep tabs on their rental income.
Rent-to-own: an agreement that allows tenants to buy the property after renting it for a set period, allowing them to test out living in the home before committing to a purchase.
Renters Insurance: Insurance that protects the tenant’s personal property in case of damage or theft.
Rent Ledger: A record of rent payments made by the tenant, including the amount and date paid.
Rental Property: A property occupied by tenants who pay the owner in return for utilizing the living space and any permanent or temporary attached fixtures. Also, according to the IRS, a permanent rental property is a house, duplex, or apartment complex occupied by tenants and not serving as living quarters for the owner or any dependents he adds to his federal tax return forms.
Rent Proration: the process of adjusting the rent to reflect the exact number of days a tenant occupies the property in a given month, ensuring they only pay for the time they actually lived there.
Return on Investment (ROI): is a key metric that reveals how much profit an investor earns from a property, expressed as a percentage of the total investment cost, helping gauge the property's financial success.
Section 8: A government program that provides rental assistance to low-income individuals. Many states require all landlords accept Section 8 Vouchers, be sure you know the rules of your state before saying no to this form of payment.
Security Deposit: A sum of money held by the landlord to cover any damages caused by the tenant. You can also use the security deposit to cover any unpaid bills the tenant left behind.
Single Family House (SFH): A free-standing home built for one family.
Sublease: When a tenant rents out their rental unit to another person while still under lease. I do not generally recommend you allow tenants to sublease unless you have given permission for them to do so. Be sure to require that you have a right to review a general application If you consider allowing a subtenant.
Tenant or Resident: These 2 words are used interchangeably depending on where you live in the country. A person who rents property from a landlord.
Tenant Damages: Any damage occurring during the lease term that isn’t considered normal wear and tear. Paying for the repair of these damages is the responsibility of the tenant.
Tenant Screening: The process of evaluating potential tenants through background, credit, and rental history checks.
Turnover: The process of preparing a rental unit for a new tenant after the previous tenant moves out.
Vacancy Rate: The ratio of vacant rental units to the total number of owned rental units in the building, city, or in another operating category.
Wear and Tear: Normal deterioration of a rental property over time due to everyday use.
Writ of Restitution: A court order requested by the landlord when a tenant remains in the property after the grace period has passed. The writ allows a forced eviction by a law enforcement officer.
Zoning Laws: Local regulations that determine how a property can be used (residential, commercial, etc.).
How about you, do you have any “vocabulary” words that have tripped you up or forced you to do a quick google search? I’d love to hear them in the comments below!