Real Estate Word of the Day: Cash Flow

Cash flow refers to the net amount of cash being transferred into and out of a business. In simpler terms, it’s the money you make from your investments after all expenses are paid. Positive cash flow means you’re earning more than you’re spending, while negative cash flow indicates that expenses are outpacing income.

To calculate cash flow, you subtract the total expenses from the total income. Cash Flow = Total Income − Total Expenses

In real estate, cash flow is the difference between the income generated from a property and the expenses associated with owning and managing that property. This includes all the money you receive from your property, primarily rental income. If you own a multi-family…

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Real Estate Word of the Day: Amortization

Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment covers both interest and a portion of the principal (the amount borrowed). Over the life of the loan, you gradually pay off the debt in regular installments until it's completely paid off.

When you take out a mortgage to buy a home, the lender provides a schedule known as an amortization schedule. This schedule details each payment you'll make over the life of the loan, showing how much of each payment goes towards interest and how much goes towards reducing the principal. In the early stages of your mortgage, a larger portion of your monthly payments goes toward interest. As time goes on, more of each…

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Real Estate Word of the Day: Earnest Money

Earnest money is a deposit made by a potential homebuyer to show that they are serious about purchasing a property. It's a gesture of good faith, indicating that the buyer is committed to following through with the purchase. This deposit is typically held in an escrow account and is applied towards the down payment or closing costs upon finalizing the sale.

Earnest money shows the seller that the buyer is serious about the purchase, which can make the buyer's offer more attractive, especially in competitive markets. Once the earnest money is deposited, the property is taken off the market, and the seller is less likely to entertain other offers. This gives the buyer time to conduct inspections, secure…

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Real Estate Word of the Day: Encumbrance

An encumbrance is a claim, lien, charge, or liability attached to and binding real property. It is any right or interest in land that may exist in someone other than the owner, but which will not prevent the transfer of title. Encumbrances can affect the property's value and limit its use.

Types of Encumbrances
Liens

Liens are legal claims against a property, typically used as security for a debt. Common types of liens include:

  • Mortgage Liens: These are claims by a lender against a property until the mortgage is paid in full.
  • Mechanic’s Liens: Filed by contractors or subcontractors who have performed work on the property but have not been paid.
  • Tax Liens: Imposed by the government for unpaid…

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Real Estate Word of the Day: Contingent Offer

A contingent offer is an offer on a property that is dependent on certain conditions being met before the sale can be finalized. These conditions, known as contingencies, are outlined in the purchase agreement and must be satisfied for the transaction to proceed. If the contingencies are not met, the buyer can withdraw the offer without penalty, and the seller can continue to market the property to other potential buyers.

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Looking to buy or sell your home on Staten Island? For all your real estate needs, look no further than Tom Crimmins Realty! Give us a call at (718) 370-3200, and we can provide you with professionally-trained agents who are flexible to all…

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Real Estate Word of the Day: 1031 Exchange

Named after Section 1031 of the Internal Revenue Code, a 1031 Exchange allows investors to defer paying capital gains taxes when they sell an investment property and reinvest the proceeds into a new qualifying property. By doing so, investors can leverage their profits to acquire more valuable properties, thus enhancing their investment portfolio without the immediate tax burden.

The primary advantage is the ability to defer capital gains taxes, potentially until the sale of the replacement property. This can lead to significant tax savings, allowing more capital to be reinvested. By reinvesting the entire sale proceeds into new properties, investors can enhance and diversify their portfolios, thus…

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Real Estate Word of the Day: Assumption

An assumption refers to the transfer of an existing mortgage from the current homeowner to the buyer. Essentially, the buyer "assumes" the mortgage, taking over the responsibility for the remaining loan balance, interest rate, and terms of the original loan. This can be an attractive option for both buyers and sellers under the right circumstances.

One of the main reasons buyers consider assuming a mortgage is to take advantage of a lower interest rate. If the original loan was secured during a period of low interest rates, the buyer can benefit from these favorable terms, potentially saving thousands of dollars over the life of the loan compared to securing a new mortgage at current higher rates. Assuming a…

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Real Estate Word of the Day: Walkthrough

A walkthrough is a final inspection of a property by the buyer before closing the deal. It typically occurs shortly before the closing date, often within 24 to 48 hours. The primary purpose of a walkthrough is to ensure that the property is in the agreed-upon condition, all requested repairs have been made, and no new issues have arisen since the last time the buyer viewed the property.

During the negotiation phase, the buyer and seller may agree on certain repairs or improvements that the seller needs to complete before closing. The walkthrough allows the buyer to confirm that these repairs have been satisfactorily completed. Additionally, it ensures that the property is in the same condition as when the…

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Real Estate Word of the Day: Variance

In statistical terms, variance measures how much a set of numbers (data points) differ from the mean (average) of those numbers. It provides insights into the spread or dispersion of data points in a dataset. A higher variance indicates that the numbers are more spread out from the mean, while a lower variance indicates that they are closer to the mean.

While it might seem like a term plucked straight out of a statistics textbook, its implications in real estate are profound and worth understanding. Understanding the variance in property values within a specific neighborhood or region can help investors assess the potential risk and return. A high variance in property prices might indicate a diverse market with…

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Real Estate Word of the Day: Usury

Usury refers to the act of charging interest on a loan at a rate that exceeds the legal limit set by law. Historically, usury laws were established to protect borrowers from exorbitant interest rates and to ensure fair lending practices. These laws vary by jurisdiction, but their core purpose remains the same: to prevent lenders from exploiting borrowers through excessive interest charges.


Mortgage lenders must adhere to state and federal usury laws when setting interest rates. If a lender charges an interest rate above the legal limit, it can be considered usurious, leading to legal consequences and financial penalties. For borrowers, usurious rates can make mortgage payments unaffordable, potentially leading to…

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