Abstract of title: An outline history of the ownership of a parcel of land, from the original grant, with changes in title, and with a statement of all mortgages, liens, encumbrances, etc. affecting the property.
Amortization: A gradual paying off of a debt by periodic installments.
Appraisal value: An estimate of the value of property substantiated by various analyses. Used by developers in deciding whether to go forward with a project, determine a reasonable sale price, or allocate the purchase price to the land and improvements.
Building valuation: The process of assessing the value or price of a building.
Capital: Money or property invested in an asset for the creation of wealth.
Capitalization rate (cap rate): The rate, expressed as a percentage, at which a future income flow is converted into a present value figure.
Construction costs: The cost of all construction portions of a building project, generally based upon the sum of the construction contract(s) and other direct construction costs; does not include compensation of the architect and consultants, the cost of the land, right-of-way, or other costs.
Construction loan: A loan usually made by a commercial bank to a builder or prospective homeowner for use in constructing improvements on real estate (new construction or remodeling). It usually runs six months to two years.
Debt equity ration: A measure of a company’s financial leverage calculated by dividing long term debt by shareholders equity. It indicates what proportion of equity and debt the company is using to finance its assets.
Debt service: Periodic repayments of a loan, with a portion of the payment applied to interest and the balance applied to repayment (amortization) of principal.
Depreciation: Loss in value from use and/or age.
Difference in life-cycle costs (Present-Value Savings): The dollar value of the energy savings over the life of a system.
Discounted payback for full system cost: The number of years it will take for energy savings to pay back the full cost of a mechanical system, taking into consideration the value of money over time.
Disincentives: Mechanisms (e.g., regulations, fees, taxes, policies, or programs) which act as deterrents and discourage, or prevent, decisions, actions, or behaviors which are targeted and undesirable.
Economic growth: The change over a period of time in the value (monetary and non-monetary) of goods and services and the ability and capacity to produce goods and services. It is economic growth that generates the wealth necessary to provide social services, health care, and education. It is the basis for ongoing job creation. However, sustainable development requires that there be a change in the nature of economic growth, to ensure that goods and services are produced by environmentally sound and economically sustainable processes. This will require efficient use of resources, value-added processing, sustained yield management of renewable resources, and the consideration and accounting of all externalities and side effects involved in the extraction, processing, production, distribution, consumption, and disposal of those goods.
Environmental cost: A quantitative assessment of impacts such as resource depletion, air, water, and solid waste pollution, and disturbance of habitats.
Equitable: Dealing justly and fairly with all those concerned.
Equity: That portion of an ownership interest in real property (or other securities) that is owned outright, rather than financed by debt.
Full-cost accounting: The process of accounting for and including all environmental, economic, and social costs (and benefits) of a particular action, activity, policy, or development in the decision-making and/or approval process and pricing.
Hard costs: In new construction, includes payments for land, labor, materials, improvements, and the contractor’s fee.
Incentive: Any benefit (economic, regulatory, policy, etc.) that influences or encourages a desired action or behavior.
Internal rate of return (IRR): The true annual rate of earnings on an investment. Equates the value of cash returns with cash invested, taking compound interest factors into account.
Liability: An obligation to do or refrain from doing something. The responsibility for ones own actions and responsibility for the adverse effects they may have on third parties, including financial responsibilities.
Life cycle assessment: A process to evaluate all costs of a product or process through its entire existence, including extracting and processing of raw materials, manufacturing, transportation, distribution, use, maintenance, recycling, reuse, and disposal.
Life-cycle cost (LCC) of material: The costs accruing throughout the service life of a material. Life-cycle costs address the capital costs involved in production, maintenance, and disposal, and can also include other environmentally related capital costs and societal costs.
Location-efficient mortgage (LEM): An innovative new type of mortgage designed to encourage and facilitate home ownership in transit-accessible inner city and denser suburban neighborhoods. This model applies the money people save in transportation costs toward their mortgage payments in location-efficient areas, enabling them to buy a higher-priced “location-efficient” home than they could otherwise afford.
Marginal cost: The sum that has to be paid for the next increment of product or service.
Market incentives: Incentives that are directed at changing behavior through the market economy. They can have a direct effect on the price or availability of a particular resource, good, or service.
Miniperm loan: A short-term loan (usually five years) meant to be an interim loan between a construction loan and a permanent loan. It is usually secured like any other loan.
Mortgage: A written contract that uses real estate as security for the payment of a specified debt.
Net operating income (NOI): Income from real estate property after operating expense have been deducted, but before deducting income taxes and financing expenses (interest and principal payments). The formula is: NOI = gross income - operating expenses.
Net present value (NPV): An approach used in capital budgeting where the present value of cash inflow is subtracted from the present value of cash outflows.
Operating costs: Costs directly related to the operation, maintenance, repair, and management of a property and the utilities that service it. Includes insurance, property taxes, utilities, maintenance, and management expenses.
Payback period: The time estimated for a capital investment to pay for itself, calculated by relating the cost of the investment to the profit it will earn or savings it will incur.
Permanent loan: A long-term loan on real estate from a financial institution. Subject to specific conditions, such as construction of improvements.
Premium: The value of a mortgage or bond in excess of its face value. Buyers or renters sometimes pay a premium because the project has attributes for which they are willing to pay more than market rate.
Present value (PV): The amount today that a sum of money in the future is worth, given a specified rate of return.
Pro forma: A financial statement that projects gross income, operating expenses, and net operating income for a future period based on a set of specific assumptions.
Proper resource pricing: The pricing of natural resources at levels that reflect their combined economic and environmental values.
Rebate: A deduction from an amount charged or a return of portion of a price paid—as in a utility rebate awarded for an energy efficient building.
Return on investment (ROI): The annual return that can be expected on the equity funds invested.
Site development costs: All costs needed to prepare the land for building construction, such as the demolition of existing structures, site preparation, off-site improvements, and on-site improvements.
Soft costs: Expenditures associated with real estate development that are incorporated into construction costs. Includes architect fees, legal fees, marketing costs, interest, origination fees, appraisals, and other third-party charges.
Stretch ratio: In mortgage calculations, the percentage that lenders will “stretch” a mortgage (i.e., from 28% of the homebuyer’s salary to 30%) for homes that meet energy-efficiency ratings or other standards, realizing that other expenses such as operating or transportation costs will be lower.
Subsidy: A financial benefit or form of assistance given to producers (e.g., grants, loans, tax allowances) which enables them to sell or export goods at less than their costs of production, thus creating unfair competition.
Triple-net lease: A lease in which the tenant pays all operating expenses of the property; the landlord receives a net rent.