Real Estate Glossary
All the terms you need to know to buy, invest and rent properties with confidence.
A
ADR (Average Daily Rate) learn more →
Average daily rate of a vacation rental property. Calculated by dividing total revenue by occupied nights.
Appraisal
Official property valuation carried out by a certified appraiser. Required for mortgage credit and title transfer.
Amenities
Common services and facilities of a development: pool, gym, coworking space, roof garden, security, etc.
B
Breakeven
Break-even point: the time it takes for an investment to pay for itself. Measured in months. Breakeven = Total Investment / Net Monthly Cash Flow.
C
Cap Rate learn more →
Capitalization rate: annual net income / purchase price × 100. Example: $120K net annually / $2M price = 6% cap rate.
Cash on Cash
Return on invested capital (down payment + expenses). Measures how much return you generate on what you actually paid out of pocket.
Bridge Loan learn more →
Temporary financing to acquire a property while another is being sold or a permanent mortgage is being arranged.
D
Development learn more →
New construction real estate project. Can include apartments, houses, commercial spaces or land within the same complex.
DSCR
Debt Service Coverage Ratio: NOI / Annual debt payment. If >1, the property generates more income than the debt costs.
E
Down payment learn more →
Initial payment to reserve and secure the purchase of a property. Typically 10-30% of the total value.
Title deed learn more →
Legal process of property transfer before a notary public. Includes income tax, appraisal, notary fees and registration.
Immediate Delivery
Property ready to move in or rent. No need to wait for construction.
F
Bank Trust learn more →
Bank legal instrument that allows foreigners to acquire properties in restricted areas of Mexico (50 km from the coast). Valid for 50 years, renewable.
G
Gross Yield
Gross yield: annual gross rent / purchase price × 100. Does not deduct operating expenses.
I
IRR (IRR)
Internal Rate of Return: annualized yield considering the time value of money. Includes cash flows and resale value.
L
Lock-off
Unit design that allows splitting an apartment into two independent spaces rentable separately. Maximizes rental income.
M
Master Plan
Comprehensive urban design of a development or area. Defines land use, green areas, roads, amenities and construction phases.
N
NOI
Net Operating Income: net operating income. Gross rent - operating expenses (maintenance, management, insurance, taxes). Does not include debt.
Net Yield
Net yield: annual NOI / purchase price × 100. Deducts operating expenses from gross yield.
O
Occupancy learn more →
Percentage of occupied nights in a period. 70% occupancy = 255 rented nights out of 365.
P
Appreciation learn more →
Increase in property value over time. The Riviera Maya averages 8-12% annual appreciation.
Pre-sale
Initial marketing stage before construction begins. Lower prices and greater appreciation potential.
Price-to-Rent Ratio
Purchase price / (monthly rent × 12). Lower ratio = better investment. Below 15 is considered attractive.
R
RevPAR learn more →
Revenue Per Available Room/Night: income per available night. ADR × Occupancy. Combines rate and demand in one indicator.
ROI learn more →
Return On Investment: total gain (rent + appreciation) / total investment × 100. General return measure.
S
SOFOM learn more →
Multiple Purpose Financial Company: non-bank financial institution that offers loans with more flexible requirements than a bank.
STR
Short-Term Rental: short-stay rental (days/weeks) typically via Airbnb, Booking or VRBO.
T
Unit Type
Unit configuration: number of bedrooms, bathrooms, layout. Example: 2 bd + 2 ba with lock-off.
U
Unidad learn more →
Individual property within a development. Can be an apartment, penthouse, house, land or commercial space.
V
Vacation Rental
Short-stay rental model for tourists. Higher yield than residential but requires active management or a property manager.