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New Investors Need To Know The Lingo

Published on Thursday - February 06, 2014

It can be a daunting task for new investors to learn the myriad of financial terms associated with real estate.  APR, GFE and HUD are just a few of the things you will need to familiarize yourself with before you really gain momentum. After a while, every acronym sounds the same and terms can get pretty confusing. You don’t have to know every term in all areas of finance, but at a minimum you should know the basics. This will give you the confidence to hold conversations with anyone in the business. It won’t matter if you are talking to a realtor, attorney, appraiser or fellow investor. It will also allow you to quickly decipher information and know whether or not you are getting a good deal. You don’t need to be able to write a book about each term, but you should know the real estate lingo of your business.

There are many different terms in this business that can be rather intimidating. Just in real estate alone, there are terms regarding the mortgage process, closing, accounting, rents schedules and contracts. That is just the tip of the iceberg. The mistake most new investors make is thinking they have to master all of these terms immediately. Over time you will become more comfortable with relevant terms, but focus on one particular area when you first start. You will be surprised by just how much each area entails.

The buying process starts with a prequalification and ends with the closing. In between, you will hear everything from amortization schedules to liens to escrow accounts. Start with the preapproval process and work from there. Find out as much as you can about mortgages and financing. If you can’t find what you are looking for online or in print, ask your mortgage broker or lender. They are essentially working for you. If you have questions about any step of the process or any term you see, don’t feel like you can’t ask them.

There is no test or license to become an investor. You can know as much or as little about the business as you wish. However, like most areas in business, you will find that the more you know and the more prepared you are the better you will be. A good idea is to keep a notebook in your car or at your office to write down any new work, term or phrase that isn’t familiar to you and research it later. You don’t have to stop everything you are doing to punch the word in your phone, but the more you know the greater impact it will have on your business.

If you want to focus your business on wholesales, learn the terms associated with that process. If you want to focus on tax liens, there will be terms specific for that as well. Whatever your niche is and wherever you want to invest, you should know as much as you can in that area. You don’t need to make flashcards and spend your day studying in a library, but you should know what you are talking about and more importantly what you are investing in.

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