Multifamily Real Estate Financing Glossary
Learn the lingo of commercial and multifamily finance with our easy-to-read and comprehensive glossary of terms.
Trailing Twelve Months, which is also referred to as T12 or TTM, is a financial statement that attempts to provide a comprehensive picture of a property’s net operating income of a property over the previous twelve-month period.
A full service lease, sometimes known as a full service gross lease, or FSG lease, is a type of commercial real estate lease in which the landlord is responsible for paying all operating expenses for the property. This typically includes insurance, utilities, necessary property repairs and maintenance, taxes, and other, unexpected expenses, but can vary greatly from lease to lease.
A modified gross lease, or MG lease, is a type of commercial real estate lease where the property owner and the tenant share in the operational costs of the property, including utilities, insurance, taxes, and maintenance. An MG lease can be considered to be a hybrid between a NNN (triple net) lease and an FSG (full-service gross) lease.
Floor area ratio (FAR) is a zoning metric that uses a building’s floor area and lot size to calculate the maximum square footage of a building that can be developed on a specific parcel of land.
LTV, or loan-to-value ratio, is one of the most important metrics in commercial real estate. It is used to compare the amount of a loan to the current estimated market value of a commercial or multifamily property.
An assumable loan is a loan that can be assumed, or taken on, by a new borrower before the end of the loan’s term. Many types of loans are assumable, including most Fannie Mae, Freddie Mac, HUD multifamily, and CMBS loans.
Debt yield is a commercial real estate metric used by lenders to determine how long it would take them to get back their investment if the borrower defaulted on their loan and they had to foreclose on the property. Debt yield is calculated by dividing a property’s net operating income (NOI) by the total loan amount.
Commercial and multifamily real estate is generally identified by building quality or class. Class A, B, and C are the main categories, with “A” being best, and "C” being worst, though some properties may be referred to as “Class D.” Building classes are typically relative to the quality of properties offered on the local real estate market.
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