So many terms, so little time. Now that the groaning is over, let’s look at a few terms that are the most important for you to know. The rest you can look up on your own when you have all that extra time on your hands.

1. Deed of Trust – A deed of trust involves you, the trustor, the person lending you

the money to buy your dream rental, the beneficiary and somebody who holds

the document in trust, the trustee. The trustee might be a title company or

attorney.

1. Mortgage – A mortgage is between you, the buyer or mortgagor and the lender or mortgagee. No trustee to be found no matter how hard you look.

(You won’t notice much difference between these two types of financing unless there is a foreclosure. The trust deed bypasses the court system and is cheaper and easier for the lender to foreclose should that unfortunate eventuality occur).

3. ROI – Return on Investment. This is how much your investment pays after the dust settles.

4. Vacancy Factor – An educated guess as to how long your rental will be vacant between tenants.

5. Rental Agreement – This is the agreement signed between the landlord and tenant. It specifies the terms of the rental including your obligations as a landlord and the tenant’s obligations. Rental agreements are usually for 30 days or less.

6. Lease Agreement – When you agree to a lease, you have a specified term of usually six months or more. Depending on the terms of the lease, the rents you receive will probably be locked in for that period. The tenant who breaks a lease agreement may be liable for the rents remaining on the lease.

7. Security Deposit – This is what you, as a landlord requires your tenant to pay in advance to cover damages. There are limits to how much security deposit you can demand depending on where you live. You can find information on limits applicable to your state by go to http://www.nolo.com/article.cfm/objectID/66BB4E6B-8A0E-4230-9E0E7AAE42638269/213/178/187/ART/

8. Rent Control Laws – These laws not only may restrict the amount of rent you can charge certain sectors of the population such as senior citizens; they also define your obligations to the tenant. For instance, if you haven’t made a necessary repair to your rental, the tenant may pay for the repair and deduct that payment from the rent he pays you. If you’re a real slumlord, an acting agency may withhold all your rents and pay for the repairs. These laws depending on where you live. Be aware of the rent control laws in your area.

9. Capital Gains – Capital gain is the amount of money on which you get to pay taxes. Lucky, lucky you. This term refers to your profits after costs and certain expenses are subtracted (deducted). Short-term capital gains are paid on properties held for a year or less. Long-term capital gains are properties held for 366 days or more. Short-term capital gains are taxed as ordinary income. Long-term capital gains are taxed somewhere between 5 and 15 percent depending on your tax bracket. (In 2010, this may change.)

Okay, I lied. We didn’t talk about buying seized properties, but we did get this really boring stuff out of the way. Next time we’ll have some fun.

Be sure and keep up with this series of hubs. Check out:

http://hubpages.com/hub/The_Irreverent_Guide_to_Rental_Property_Investments_The_types

http://hubpages.com/hub/The_Irreverent_Guide_to_Buying_Rentals_1

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