Knowledge Base
Definitions and explanations of the terms every Florida landlord should know.
159 terms and growing
🏠 Buying Rental Property
Adjusted Basis
The property's original cost, adjusted over time by improvements, depreciation, casualty losses, and certain other tax events. Adjusted basis is the starting point for calculating gain or loss when ownership ends.
Appraisal
A professional opinion of a property's market value, typically required by lenders before approving a mortgage.
Assessed Value
The value assigned by the county property appraiser for property tax purposes. It is often different from market value.
Cap Rate
A tax deduction allowing landlords to recover the cost of an income-producing property over a set period.
Capital Improvements
Permanent improvements that add value, extend useful life, or adapt the property to a new use. Unlike repairs, capital improvements are generally added to the property's basis.
Cash-on-Cash Return
A real estate valuation measure used to estimate the potential return on an investment property based on expected income.
Closing Costs
Expenses paid when buying property, including lender fees, title insurance, recording fees, surveys, inspections, and other transaction costs.
Cost Basis
Generally the purchase price plus certain acquisition costs. Cost basis is the foundation for determining depreciation and future capital gains.
Debt Service
The total amount required to make scheduled principal and interest payments on a loan.
Debt Service Coverage Ratio (DSCR)
A lender's measurement of whether rental income is sufficient to cover mortgage payments. A DSCR above 1.0 generally means the property generates enough income to pay its debt.
Down Payment
The cash contribution made by the buyer at closing, reducing the amount borrowed.
Due Diligence
The investigation performed before purchasing property, including inspections, title review, leases, zoning, insurance, environmental issues, and financial analysis.
Earnest Money
A good-faith deposit showing the buyer's commitment to complete the purchase.
Equity
The difference between the property's market value and the amount owed on loans secured by the property.
Escrow
Funds or documents held by a neutral third party until specified conditions of the transaction are satisfied.
Fair Market Value
The price a willing buyer and willing seller would agree upon when neither is under pressure to act.
Loan-to-Value (LTV)
The loan amount expressed as a percentage of the property's value. Lower LTV generally means lower lender risk.
Mortgage Amortization
The gradual repayment of a mortgage through scheduled payments that reduce both principal and interest over time.
Net Operating Income (NOI)
Rental income minus normal operating expenses, before mortgage payments, depreciation, and income taxes. NOI is one of the most important measures of a property's financial performance.
Principal Reduction
The portion of each mortgage payment that reduces the outstanding loan balance.
Return on Equity (ROE)
The annual return generated based on the owner's current equity in the property.
Return on Investment (ROI)
A measurement of the actual annual cash return earned on the cash invested in a property.
💰 The Money Side of Landlording
1031 Exchange
Named after IRC Section 1031, this is the legal mechanism that enables a tax-deferred like-kind property exchange.
1099-C (Cancellation of Debt)
A form you receive when a lender forgives a debt you owed — which the IRS typically treats as taxable income.
Capital Gain
The profit you make when selling a property for more than your adjusted basis.
Capital Loss
A capital loss occurs when an investment asset is sold for less than its adjusted cost basis.
Cost Segregation
The profit realized from the sale of an investment property, calculated as the selling price minus the adjusted basis.
Depreciation
A permanent upgrade to a property that increases its value or extends its useful life, rather than just restoring it.
Depreciation Recapture
When you sell a rental property, the IRS taxes the depreciation you claimed over the years as ordinary income.
Installment Sale
Tax liability on the profit from an asset sale that is postponed to a future date.
Like-Kind Exchange
A like-kind exchange is a tax-deferred transaction allowing investors to swap one business property for another without immediate capital gains taxes.
Loan Deficiency
A loan deficiency is the remaining balance due on a mortgage after a property is sold for less than the total debt owed.
Net Investment Income Tax (NIIT)
The NIIT is a 3.8% tax on investment income for high-income earners exceeding specific threshold levels.
Ordinary Income
Ordinary income is money earned from wages, business profits, or interest, taxed at standard progressive federal income tax rates.
Passive Activity Loss
Tax losses from rental properties that may be limited by the IRS when offsetting other forms of income.
Passive Income
The original cost of a property plus improvements and minus accumulated depreciation for tax purposes.
Portfolio Income
Non-like-kind property or cash received in a 1031 exchange that is subject to immediate taxation.
Schedule E
The IRS tax form used by rental property owners to report income and expenses for their real estate activities.
Single-Member LLC
A business structure with one owner that provides limited liability protection and pass-through taxation for rental property owners.
Step-Up in Basis
A tax provision that adjusts the cost basis of inherited assets to their fair market value at the time of the owner's death.
Tax Basis
The original cost of a property used to determine gain or loss for tax purposes when the property is sold.
Taxable Debt Forgiveness
The IRS considers cancelled or forgiven debt, such as unpaid loans or mortgage write-offs, as taxable income for the recipient.
Taxable Disposition
A taxable disposition occurs when an asset is sold or exchanged, triggering a taxable gain or loss for the owner.
⚖️ Florida Landlord Law
15-Day Notice
A written notice required to terminate a month-to-month tenancy, providing the tenant at least 15 days' notice before the end of the monthly period.
3-Day Notice
A mandatory legal notice giving a tenant three business days to pay rent or vacate the premises.
7-Day Notice (With Opportunity to Cure)
A formal written notice giving tenants seven days to fix a lease violation or move out before eviction proceedings can begin.
7-Day Notice (Without Opportunity to Cure)
A legal notice issued to a tenant for non-compliance that is so severe it does not require a chance for them to fix the behavior before eviction.
Abandonment
A situation where a tenant vacates the premises without notice, often leaving personal property behind, before the lease term expires.
Actual Damages
Actual damages represent the quantifiable monetary losses a landlord or tenant suffers due to a breach of contract or law.
Civil Summons
A court-issued document officially notifying a tenant that they are being sued and must respond to the eviction complaint within five business days.
Complaint
The formal legal document filed by a landlord to initiate an eviction lawsuit against a tenant in county court.
Constructive Eviction
A situation where a landlord's failure to maintain a habitable premises forces a tenant to vacate, potentially ending their obligation to pay rent.
Default Judgment
A court decision awarded to the landlord when a tenant fails to file a formal response to the eviction complaint within the statutory timeframe.
Eviction
The legal process by which a landlord recovers possession of a rental property from a tenant who has breached the lease agreement.
Eviction Complaint
The primary legal document filed with the county clerk that initiates the formal eviction process against a non-compliant tenant.
Eviction Summons
A court-issued document that formally notifies a tenant of an eviction lawsuit and specifies the deadline for filing a response.
Final Judgment
The court's official decision in a legal case, such as an eviction, which grants the landlord the right to regain possession of the property.
Holdover Tenant
A tenant who remains in the rental property after their lease agreement has expired without the landlord's explicit permission.
Material Noncompliance
A significant violation of the lease or tenant obligations that justifies the landlord's move to terminate the tenancy.
Mediation
A voluntary dispute resolution process where a neutral third party helps two conflicting sides reach a mutually agreeable settlement.
Possession
Possession refers to the legal right to occupy and control a rental property as granted under a lease agreement.
Premises
The specific area or structure being rented, as defined in the lease agreement, which the landlord must maintain and the tenant must protect.
Self-Help Eviction
An illegal attempt by a landlord to force a tenant out without following the court-ordered eviction process.
Service of Process
Service of process is the legal requirement to formally deliver court documents to a party involved in a lawsuit.
Sheriff Lockout
The final stage of an eviction where the County Sheriff physically removes a tenant and restores possession to the landlord.
Stipulation
A formal legal agreement between parties in a court case to resolve issues or settle a dispute without a full trial.
Writ of Possession
A legal document issued by a court that authorizes a sheriff to remove a tenant and restore possession of the property to the landlord.
📄 Leases & Forms
Addendum
A supplemental document attached to a lease that adds specific terms or modifies the original agreement without rewriting the entire contract.
Assignment
An assignment occurs when a tenant transfers their entire remaining interest in a lease agreement to a third party.
Co-Signer
A person who signs a lease alongside the tenant, assuming legal responsibility for rent payments and damages if the tenant defaults.
Guarantor
A guarantor is a person who agrees to be legally responsible for a tenant's financial obligations if they fail to pay.
Lease Renewal
An agreement to extend the duration of an existing rental contract under either the original or newly negotiated terms.
Month-to-Month Tenancy
A rental arrangement that renews automatically each month until either the landlord or tenant provides proper notice to terminate.
Notice of Non-Renewal
A formal notification provided by either party stating that the rental agreement will not be extended and the tenant must vacate.
Prorated Rent
The portion of rent charged for a partial rental period when a tenant moves in or out mid-month.
Security Deposit
Funds held by a landlord to cover potential damages, unpaid rent, or lease violations caused by the tenant during the tenancy.
Security Deposit Claim
The formal procedure a landlord must follow to retain a portion or all of a security deposit due to damages or unpaid rent.
Tenant Estoppel
A legal document where a tenant confirms the status of their lease and rental payments, often used during property sales.
Walk-Through Inspection
A guided tour of the rental unit at the start and end of a lease to document its condition and identify existing or new damage.
👥 Tenant Screening
Adverse Action Notice
An adverse action notice is a required legal notification sent to a tenant applicant who was rejected due to information in their report.
Applicant
An individual who has submitted a formal request and documentation to lease a rental property.
Consumer Report
A broader category of reports, including credit reports and background checks, used to evaluate a prospective tenant's reliability.
Credit Report
A record of an applicant's credit history, including loans, payment behavior, and debts, used by landlords to assess financial reliability.
Criminal Background Check
A screening process used to review an applicant's history of arrests and convictions to evaluate potential risk to other residents.
Employment Verification
The process of confirming a prospective tenant's current employment status and income through their employer.
Eviction History
Eviction history tracks past legal proceedings initiated by landlords against an individual for lease violations or non-payment of rent.
Fair Credit Reporting Act (FCRA)
A federal law that regulates how consumer credit information is collected and used during the tenant screening process.
Fair Housing Act
The Fair Housing Act is a federal law that prohibits discrimination in housing based on race, color, religion, sex, national origin, familial status, or disability.
Income Verification
The process of confirming a prospective tenant's earnings to ensure they can afford the monthly rent.
Reference Check
The process of verifying an applicant's rental history by contacting previous landlords to assess their reliability.
Screening Criteria
Screening criteria are the objective, non-discriminatory standards used to evaluate whether a tenant is suitable for a rental property.
Service Animals
Dogs individually trained to do work or perform tasks for a person with a disability — protected under the Fair Housing Act and ADA, distinct from emotional support animals.
Source of Income
The origin of a tenant's funds used to pay rent, such as employment wages, government benefits, or retirement distributions.
Tenant Score
A numeric rating generated from a prospect's credit and rental history to predict their reliability as a tenant.
🛠️ Property Management
ACH Payment
An electronic bank-to-bank transfer that allows tenants to pay rent directly from their checking or savings account.
Late Fee
An additional charge assessed to a tenant when rent is not paid by the date specified in the lease agreement.
Maintenance Request
A formal notification from a tenant to a landlord reporting an issue that requires repair or attention.
Notice to Enter
The formal notification a landlord must provide to a tenant before accessing a rental unit for repairs or inspections.
Preventive Maintenance
The practice of performing regular inspections and servicing to identify issues before they cause property damage or system failure.
Property Inspection
A systematic review of a rental property's condition to identify maintenance needs and ensure lease compliance.
Rent Ledger
A rent ledger is a formal financial record documenting all rent payments received, missed payments, and associated fees for a unit.
Rent Roll
A detailed document or report summarizing the rental income, lease status, and unit occupancy of a property.
Rent-to-Income Ratio
The rent-to-income ratio is a financial metric used to evaluate a prospective tenant's ability to afford monthly rent.
Work Order
An internal document used by property managers to assign, track, and verify repairs performed on a rental property.
🏚️ Repairs & Maintenance
Habitability
Habitability refers to the implied warranty that a rental property is safe, clean, and fit for human occupation.
Material Repair
A significant repair required to maintain the habitability of a rental unit, often tied to a landlord's duty to provide a functional home.
Mold
A fungal growth that occurs in damp or poorly ventilated indoor spaces, posing potential health and property risks.
Roof Certification
A professional inspection report confirming the condition and remaining estimated service life of a roof.
Useful Life
The estimated lifespan of an item or building component before it requires replacement due to normal wear and tear.
Wear and Tear
The expected, gradual deterioration of a property that occurs through normal everyday use over time.
🛡️ Insurance
Actual Cash Value (ACV)
An insurance valuation method that pays for the replacement cost of an item minus its accumulated depreciation.
Additional Insured
An additional insured is a person or entity added to an insurance policy, protecting them from claims related to the primary policyholder's actions.
Builder's Risk
A specialized type of property insurance designed to cover buildings while they are under construction or undergoing major renovations.
Coinsurance
An insurance clause requiring the policyholder to maintain a minimum amount of coverage relative to the property's value to avoid partial payouts.
Deductible
The amount an insured party must pay out-of-pocket before their insurance coverage kicks in for a claim.
Dwelling Policy
A specialized insurance policy designed to protect the physical structure of a rental property rather than personal belongings.
Flood Insurance
Specialized coverage for property damage caused by rising water, typically excluded from standard homeowners or landlord policies.
Landlord Insurance
A specialized insurance policy designed to protect property owners against financial losses related to rental property ownership.
Liability Coverage
Insurance that protects landlords against financial loss if a tenant or visitor is injured on the rental premises due to negligence.
Loss of Rents
An insurance coverage that compensates a landlord for lost rental income when a property becomes uninhabitable due to a covered peril.
Ordinance or Law Coverage
An insurance endorsement that covers the increased costs of repairing a property to meet current building codes after a covered loss.
Replacement Cost
An insurance payout method that covers the cost to repair or replace property at current market prices without a deduction for depreciation.
Umbrella Policy
An extra layer of liability insurance that provides coverage exceeding the limits of standard dwelling or auto policies.
Wind Mitigation Inspection
A specialized inspection of a Florida home to determine its ability to withstand high-wind events, such as hurricanes.
🏛️ Government & Regulation
Affordable Housing
Housing units priced such that they are considered affordable to those with income at or below the median area income.
Code Enforcement
The municipal or county process of inspecting properties to ensure compliance with local ordinances and health and safety standards.
FHA
The Federal Housing Administration insures mortgages, making homeownership more accessible, especially for first-time buyers.
HUD
The U.S. Department of Housing and Urban Development promotes fair housing and affordable housing opportunities.
Housing Authority
A local government agency responsible for overseeing and administering federal and local housing programs, including vouchers.
Landlord Registry
A municipal or county-mandated database where property owners must register their rental units for local government oversight.
Rent Control
Government-imposed regulations that limit the amount a landlord can charge for rent or the rate at which rent can be increased.
Rent Stabilization
Government-imposed limits on the amount a landlord can charge for rent, a practice generally preempted by state law in Florida.
SHIP
The State Housing Initiatives Partnership (SHIP) program provides funds to local governments to create and preserve affordable housing.
Section 8
Section 8 is a federal housing program that provides rent subsidies to low-income families through vouchers managed by local housing authorities.
Tax Deed Sale
A public auction conducted by a county government to sell property due to unpaid property taxes.
Tax Lien
A tax lien is a legal claim placed against a property by the government for failure to pay property taxes.
VA Loan
A VA loan is a mortgage program guaranteed by the Department of Veterans Affairs for eligible veterans, active-duty personnel, and spouses.
🏢 Business & Entities
C Corporation
A C corporation is a legal business entity that is taxed separately from its owners, offering liability protection.
EIN
An EIN is a nine-digit number assigned by the IRS to business entities operating in the U.S. for tax purposes.
LLC
A Limited Liability Company is a legal entity that separates personal assets from business liabilities for rental property owners.
Operating Agreement
An operating agreement is a legal document outlining the management, ownership structure, and rules for a Limited Liability Company.
Partnership
A business structure where two or more individuals share ownership, profits, and liabilities.
Registered Agent
A designated person or entity responsible for receiving official legal and government documents on behalf of a business.
S Corporation
An S Corporation is a tax designation for corporations or LLCs that allows profits and losses to pass through directly to shareholders.
Sole Proprietorship
A business owned and run by one individual, with no legal distinction between the owner and the business.
📊 Investing
Appreciation
Appreciation is the natural increase in a property's market value over time due to economic factors or demand.
Cash Flow
Cash flow is the net income remaining after all operating expenses and debt service are paid from rental income.
Forced Appreciation
Forced appreciation is the process of increasing a property's value through deliberate physical improvements or operational changes.
Internal Rate of Return (IRR)
The discount rate at which the net present value (NPV) of all cash flows from a project equals zero.
Leverage
Using borrowed money to finance investments, aiming to increase potential returns but also amplifying potential losses.
Opportunity Cost
The value of the next best alternative foregone when making a choice or investment.
Value-Add Investing
Value-add investing is a strategy of purchasing underperforming properties and improving them to increase revenue and value.
🔨 Construction & Improvements
Building Permit
A building permit is an official authorization from a local government to conduct construction, renovation, or significant repair work.
Certificate of Occupancy
A document issued by a local government agency certifying a building's compliance with codes and suitability for occupancy.
Change Order
A change order is a formal document used to modify the scope, cost, or timeline of a construction contract after work has begun.
Contractor's Lien
A legal claim placed on a property by a contractor for unpaid work or materials, securing payment for services rendered.
Punch List
A list of incomplete or unsatisfactory items in a construction project that must be rectified before final payment.
Rehabilitation
The process of restoring a property to a good state of repair, often involving significant structural or system upgrades.
Renovation
The process of improving or modernizing an existing structure, often focused on aesthetics and functionality.