Glossary

Landlord Licensing

A tactic used by cities and municipalities to impose a tax on real estate investors. Although usually touted as a method of making sure that properties are safe and up to code, it always includes a fee. Usually home inspections are required by the city, invading the privacy of the renter and inconveniencing the owner and the tenant. It is a tax!

Latent Defects

Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.

Lease Option

A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment.

Legal Description

The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.

Liabilities

A person's outstanding debt obligations.

Lien

Any claim against a piece of property resulting from a debt or other obligation.

Like Kind Exchange or 1031 IRS Code

A 1031 exchange, also known as a like kind exchange, is a transaction under United States law which specifies that if an asset (usually some form of real estate such as land or a building) is sold and the proceeds of the sale are then reinvested in a like kind asset, then no gain or loss is recognized, allowing the deferment of capital gains taxes that would otherwise have been due on the first sale. This law is defined by section 1031 of the Internal Revenue Code. In order to qualify for this exchange, certain rules must be followed.: Both the relinquished property and the replacement property must be held either for investment or for productive use in a trade or business. A personal residence cannot be exchanged. The asset must be of like kind. Real property must be exchanged for real property. Personal property must be exchanged for personal property. The proceeds of the sale must be invested in a like kind asset within 180 days of the sale. However, the property must be identified within 45 days. Frequently, the most difficult component of a 1031 exchange is identifying a replacement property within the first 45 days following the sale of the relinquished property. The IRS is strict in not allowing extensions. A 1031 exchange is similar to a traditional IRA or 401K retirement plan. When someone sells assets in tax-deferred retirement plans, the capital gains that would otherwise be taxable are deferred until they begin to cash out of the retirement plan. The same principal holds true for tax-deferred exchanges or real estate investments. As long as the money continues to be re-invested in other real estate, the capital gains taxes can be deferred. Unlike the aforementioned retirement accounts, rental income on real estate investments will continue to be taxed as net income is realized. An alternative to a 1031 exchange for someone who wants to defer capital gains tax but does not want to continue to hold property is a structured sale.

Line of Credit

An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion.

LO

Lease Option

Loan Officer

A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender.

Loan Origination Fees

The fee paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Loan-To-Value Ratio (LTV)

The comparison of the amount owed on a mortgaged property to its fair market value.

Lock-In Period

The amount of time the lender has guaranteed an interest rate to a borrower.

Lot Dim

Lot Dimensions

LP

Listed Price