Glossary
A–Z of the terms we use.
41 terms defined in plain English. Cross-linked from guides across the site.
A
- ACH
- Automated Clearing House — the U.S. electronic funds transfer network used for direct deposit of monthly interest payments to investors.
- ARV
- After-Repair Value — the projected market value of a property once all planned renovations are complete. AVCG sizes rehab loans against ARV.
See also: ltv
B
- Bridge loan
- Short-term financing used to close on a property while long-term financing (bank refi, 1031 exchange, or sale) catches up. Typically 12 months.
- Business entity
- An LLC or corporation that borrows on behalf of the operator. All AVCG loans are made to a business entity with a personal guarantee.
C
- Cash-out refinance
- A refinance that pays off the existing loan and returns additional cash to the borrower from the property's equity.
- Comparable sales (comps)
- Recent sales of similar properties nearby, used to support the property's current value or projected ARV.
- Custodian
- A specialized IRA custodian that permits alternative investments — including private real estate debt. Required to hold an AVCG note inside an IRA.
See also: self directed ira
D
- Daily interest rate
- The annual interest rate divided by 365. AVCG calculates monthly interest as principal × daily rate × days in the month.
- Deed of Trust
- A security instrument used in some states to secure a loan against real property, similar in function to a mortgage.
- Draw
- A partial disbursement of a rehab or construction loan, released against completed line items of the scope of work.
- DSCR loan
- Debt-Service Coverage Ratio loan — a long-term rental loan underwritten to the property's cash flow rather than the borrower's personal income. Often used as the exit on an AVCG rental refi.
E
- Exit strategy
- How a loan will be paid off — typically a sale, a long-term refinance, or a 1031 exchange. Every AVCG loan is underwritten with a defined exit.
F
- First lien
- The senior secured position on real property. In the event of foreclosure, the first-lien holder is repaid first from any sale proceeds. Every AVCG loan is first-lien.
- Fix & flip
- An investment strategy of acquiring a property below market value, renovating it, and reselling within a short window (typically 12 months).
- Foreclosure
- The legal process by which a lender takes title to a property after a borrower defaults. Ohio is a judicial foreclosure state; the process typically takes 6–8 months.
H
- Hard money
- An older name for asset-based private lending, often used interchangeably with 'private lending.' Refers to loans priced by the collateral rather than the borrower's income.
- Holdback
- A portion of the loan withheld at closing and released later against milestones — common on construction and larger rehab deals.
See also: private lending
I
- IRA (Roth)
- Individual Retirement Account funded with after-tax dollars — qualified withdrawals in retirement are tax-free.
- IRA (traditional)
- Individual Retirement Account — contributions may be tax-deductible; withdrawals in retirement are taxable.
L
- LTV
- Loan-to-Value — the loan amount divided by the property's value. AVCG caps LTV at 65% of ARV.
See also: arv
M
- Mortgage
- A security instrument used in most states to secure a loan against real property. AVCG files a first-position mortgage on every loan.
N
- Non-owner-occupied
- Real estate not lived in by the borrower — investment property. AVCG lends only on non-owner-occupied real estate.
- Note
- The promissory note — the written promise to repay a loan. Held by the lender (or the lender's custodian for IRA-held loans).
O
- Origination fee
- A one-time fee charged by the lender at closing, expressed as a percentage of the loan amount. Program- and deal-specific at AVCG.
P
- Personal guarantee
- A borrower's personal promise to repay the loan, in addition to the business entity's obligation. Required on every AVCG loan.
- Points
- Origination fees expressed in percentage points of the loan amount. 1 point = 1% of the loan.
- Prepayment penalty
- A fee charged for paying off a loan early. AVCG loans have no prepayment penalty.
- Private lending
- Loans on real property funded by private capital rather than a bank. Also called hard money or asset-based lending.
- Promissory note
- See Note.
- Purchase agreement
- The signed contract between buyer and seller for the acquisition of a property. Required documentation for an AVCG loan.
See also: hard money
R
- Rehab budget
- The estimated cost of renovations planned for a property. Line-itemed by scope of work.
- Rental refinance
- An AVCG loan program that refinances a stabilized (or nearly stabilized) rental property — often used to take out a rehab loan or pull cash out before a long-term DSCR refi.
S
- Scope of work
- A line-item list of the renovations planned for a property, with associated budget. Required for fix & flip and construction loans.
- Seasoning
- The length of time a property or an owner has been in place. Some long-term lenders require seasoning before they'll refinance a recently-acquired property.
- Self-directed IRA
- A retirement account held by a specialized custodian that permits alternative investments — including private real estate debt. Also called SDIRA.
- Sheriff's sale
- The public auction of a foreclosed property in Ohio, held after judgment. First-lien holder is paid from proceeds first.
- Solo 401(k)
- A 401(k) plan for self-employed individuals or owner-only businesses that permits alternative investments similar to a self-directed IRA.
See also: custodian
T
- Term sheet
- A written summary of loan terms — amount, rate, fees, term, conditions — presented to the borrower after underwriting for signature.
U
- UBIT
- Unrelated Business Income Tax — a federal tax that can apply to certain income earned inside a retirement account. Generally not triggered by passive interest income on debt secured by real estate, but rules vary — consult a CPA.
- Underwriting
- The process a lender uses to evaluate a borrower and a deal before approving a loan. AVCG underwrites in-house using a six-step review.
W
- W-9
- IRS form used to certify a taxpayer identification number. AVCG requires a completed W-9 from each investor for 1099-INT reporting.