Real Home Solutions of Rhode Island

Below are the RI city/town real estate tax year schedules for use in calculating closing prorations. Note that if you miss a quarterly payment due date, the entire amount may accelerate and be due with interest (see RIGL 44-5-8).

Always confirm payment due dates with the tax collector of the appropriate municipality.

If you find any errors please contact us. Source: Tax collector pages, CATIC Municipal Guide.

These are some real estate terms we’ve run across while investing in Rhode Island for the past 15 years. We’ve deliberately simplified some of them for the sake of brevity. See also the legal disclaimer at the end.

Jump to acronyms/terms starting with: A B C D E F G H I J L M N O P Q R S T U V W

$/SF

Price per square foot, the rent or purchase price of a property divided by its usable square feet; a very basic way to compare properties, many real estate professionals recommend against using it

0x30

Mortgage term meaning zero 30 day late payments in last 12 months

1031

1031 tax-deferred exchange, a way to sell one property and buy another without paying tax

5-day

Five day demand notice (letter) for unpaid rent; see the RI Landlord-Tenant Handbook

ACV

Actual cash value, an insurance term meaning if there’s a loss you only get paid enough to replace the property in its current condition rather than as new (which would be replacement cost)

ADS

Annual debt service, i.e., the total mortgage payments made in a year

ADU

Accessory dwelling unit aka “in-law unit”, a secondary and usually smaller residential building on the same lot as a primary residential building; may be restricted to family members by zoning

Agency financing

mortgages guaranteed through government-sponsored enterprises like Fannie Mae and Freddie Mac, often at competitive rates and terms due to their large volume and implicit U.S. government backing

Allonge

An addendum signature page to a promissory note, often used when a lender intends to sell/assign the mortage as the assignee will want a signed allonge from the original note holder (example)

Apt

Apartment

ARM

Adjustable rate mortgage, where payments may change over time as interest rates change

APOR

Average prime offer rate, a benchmark rate based on average interest rates and terms offered to highly qualified borrowers; used in determining if a mortgage is a higher priced mortgage loan (HPML)

APR

Annual percentage rate, incorporates the loan interest rate and all fees and costs (e.g., broker fees, closing costs, discount points); a better way to compare loans than just loan interest rate

ARV

After repair value, the expected sale price after renovating a property

ATCF

After-tax cash flow; rental income after expenses and mortgage payments but after tax effects

ATR

Ability to repay, a lender requirement from Dodd-Frank, to protect borrowers from predatory lending

AUM

Assets under management, a number of units, or total estimated value, of stocks or real estate managed by a person or company

B&S

Bargain and sale (deed), where the grantors (sellers) make no guarantees about the title whatsoever; essentially it says, “I’m not saying I own it, but if I do, I give you what I have, with no guarantees at all”

BATNA

Best alternative to a negotiated agreement, your second choice or walk-away option in a negotiation; to do better in a negotiation, improve your BATNA or go out and find/make one

Boot

The money you get (and pay taxes on) from a 1031 exchange when it fails due to not identifying or closing on the replacement property in time

BOM

Back on market, a Multiple Listing Service (MLS) status indicating that a property had been under contract to sell, but the deal fell apart for some reason and the property is once again available

BP

Basis point, 1/100th of 1%, or 0.01%; often used in finance to compare bond or mortgage rates, for example the difference between 4.10% and 4.50% is “40 basis points”

BPO

Broker’s price opinion, an estimate of a property’s price by an agent, which is faster & cheaper than a full appraisal; often used to determine listing price for bank-owned (REO) properties

BR

Bedroom, or (depending on context) Bankruptcy

BTCF

Before-tax cash flow; rental income after expenses and mortgage payments but before tax effects

CAM

Common area maintenance; everything an owner/landlord pays to maintain the “common areas”

Cap gain

Capital gain, the difference between sale price and initial purchase price + improvements; taxed at a lower rate than ordinary income but requires owning for at least a year, could also be a capital loss

Cap rate

Capitalization rate; rate of investment return on a property if you pay all cash (no mortgage), aka “unlevered rate of return”; NOI divided by purchase price

CCR

Cash on cash return; rate of return from dividing rental income after expenses and mortgage (BTCF) by the total initial cost of the property (including any rehab needed for making units rentable)

CC&R

Covenants, conditions and restrictions; special restrictions on how owners can use a property, often found with condominiums and planned unit developments

CD

Closing disclosure; a summary of loan terms for residential mortgages which must be given to buyers/borrowers at least 3 business days before closing (one of the TRID consumer protection rules)

CE, CLE

Continuing education or continuing legal education; classes real estate agents and attorneys need to take to renew their licenses; note non-agents may also take RIAR classes for a slightly higher fee

CMA

Competitive market analysis, an estimate of a property’s value done by an agent for a property owner, often as part of a listing presentation

CO

Certificate of occupancy, permits a building to be inhabited; for new buildings and heavy renovations

COGS

Depending on context, a Certificate of Good Standing from the RI Secretary of State or “cost of goods sold”, an accounting term for how much an item sold to a customer cost the business; also see LOGS

Comps

Comparable sales; similar properties in the same area sold recently, used to determine value

CPL

Closing protection letter; allows an attorney or escrow company to conduct a closing and issue a title insurance policy, protecting the buyer/lender from any fraud or dishonesty by the closing agent

CTC

Clear to close, the final step in the loan approval process, after which a closing may occur

DBA

“Doing business as”, usually when a sole proprietor does business under a different name; could also be a fictitious business name for a corporation or LLC

DBR

Division of Business Regulation, the RI agency responsible for many real estate agent requirements

DEHO

Deceased, heirs of; same as EST, indicates a property was owned by someone but s/he passed away and it’s now owned by the heirs of the deceased (who may or may not be known)

DEM

Rhode Island Department of Environmental Management, oversees parks, wetlands, septic and cesspool systems, gas stations and other hazardous sites, inspections and cleanups, etc.

Dodd-Frank

Set of legislation enacted in 2010 to protect consumers and taxpayers from unscrupulous finance companies after the real estate crisis of 2008; also affected real estate investors

DOM

Days on market, how long a property has been (or was) listed in the MLS

DR

Dining room

Draw

An advance (or reimbursement) as part of the total amount of a construction loan; to reduce lender risk funds are given out in small chunks (draws) as phases of the project are verified completed

DSCR, DSR

Debt service coverage ratio, a measure of risk to the lender which should be at least 1.2; it is the net operating income (NOI) divided by annual mortgage payments (ADS)

DST

Delaware statutory trust, a way for multiple people to invest in property, similar to a limited partnership

DTI

Debt-to income ratio, one way of determining if a borrower can afford to get a mortgage

Due on sale

Section of mortgages indicating the entire mortgage becomes due if the property is sold or transferred

Economic occupancy

Rental income a property actually receives vs. potential income if all units were rented at market; often lower than physical occupancy due to below-market rents, incentives, and collection problems

EGI

Effective gross income, gross rental income (PGI) after an allowance for vacancy is subtracted

EIDL

Economic Injury Disaster Loans, part of the CARES Act consisting of forgivable loans to small businesses and non-profits to help them stay in business through the Coronavirus crisis

EIN

Employer identification number, identifies a business to tax authorities like an SSN does for people

EIK

Eat-in kitchen, a kitchen with enough space to eat in

E&O

Errors and omissions insurance, a special kind of insurance real estate agents, attorneys and other professionals must have

ELUR

Environmental land use restriction, a deed restriction on future land usage, agreed to by the owner and RI DEM when all environmental contamination is not removed or treated

EMD

Earnest money deposit, a small portion of the purchase price given with an offer or P&S; the contract is not considered binding until the deposit has been received by the seller or her/his agent

EST

Estate; often seen in tax assessor records, indicates a property was owned by someone but s/he passed away and it’s now owned by their “estate”; the heirs may or may not be known

et ux, et vir

Latin for “and wife” or “and husband”; sometimes seen in deeds and tax assessor records

exec

Execution, aka “judgment”; an involuntary lien recorded against a property when a homeowner owes money to a creditor, ensuring the creditor gets paid if the property is sold or refinanced

FCRA

Fair credit reporting act, legislation controlling how landlords and property managers can obtain and manage credit information

FC

Foreclosure

FHA

Federal Housing Administration, insurer of FHA mortgages that are often easier to get and have lower required down payments than other types of mortgages

FHLMC

Federal Home Loan Mortgage Corporation (aka Freddie Mac), helps more mortgage loans get made by packaging mortgages into pools and selling them to investors

FICO

one of several different credit scores an individual can have; from Fair, Isaac, and Company, which introduced the idea in 1989, there are now multiple versions of FICO and other scoring systems

FIRE

Finance, insurance and real estate; three industries which are all affected by financial issues like interest rates and which also have a strong presence in NYC

FMV

Fair market value; the value when a property has adequate market exposure and buyers and sellers don’t know each other (an “arms length transaction”)

FMR

Fair market rents, a measure calculated annually by HUD and used to determine rents paid by Section 8 or other housing assistance programs

FNMA

Federal National Mortgage Association (aka Fannie Mae), helps more mortgage loans get made by packaging mortgages together and selling them to investors; similar to FHLMC but slightly different

FRM

Fixed-rate mortgage, a mortgage whose interest rate (and therefore, principal and interest payment) doesn’t change through the life of the loan; as opposed to an ARM whose rate does change

FSBO

For sale by owner; when a property owner tries to sell a property without a real estate agent

GC

General contractor, like a “general manager” for renovation projects, s/he manages individual subcontractors like electricians and plumbers to get the overall project done

GFC

Global Financial Crisis of 2007-2008, also known as the Great Recession

GIS

Geographic information system, a way of presenting data about a city/town with an interactive map, for example by including map layers showing lot dimensions, wetlands, sewer lines, etc.

GLA

Gross living area, approximate sq ft of living/rental area; used in comps and calculating price per sq ft

Grantor

Giver, from land evidence records; the grantor “gives” an interest in real estate to the grantee; e.g., when selling a property, the seller is the grantor (giver) and the buyer is the grantee (receiver)

Grantee

Receiver, from land evidence records; the grantee “receives” an interest in real estate from the grantor; e.g., the owner gets loan funds and grants a mortgage (claim on the property) to the bank (grantee)

GRM

Gross rent multiplier, purchase price divided by gross rents (before expenses); crude measure used to compare prices of properties, doesn’t account for things like if the owner pays for utilities

GSE

government-sponsored enterprises, quasi-governmental agencies such as Fannie Mae and Freddie Mac that guarantee third party loans, allowing more loans to be made to specific economic sectors

GTOL

Gain to old lease; amount of current rent which is above market rent (this is uncommon)

HAP

Housing assistance payment, portion of a tenant’s rent paid by the Section 8 housing program; the difference between the HAP and the “contract rent” is paid by the tenant

HELOC

Home equity line of credit, a line of credit against a property which has a maximum amount and is secured by a mortgage; frequently have variable interest rates like adjustable rate mortgages (ARMs)

HML

Hard money lender, someone who makes mortgage (secured) loans on propery, usually to rehabbers and usually at much higher interest rates/points than traditional bank loans

HOA

Home owners association, a group/committee of condominium owners, or property owners in planned communities, which handles shared expenses and agreed-upon rules and sets “HOA fees”

HOI

Home owners insurance, often used when proof of property insurance is requested

HPA

Home price appreciation, a factor a builder may or may not include in its development calculations

HPML

Higher priced mortgage loan, a loan with a significantly higher rate than the Average Prime Offer Rate benchmark, requiring more stringent underwriting and loan terms

HUD

U.S. Department of Housing and Urban Development, or the HUD-1 closing statement (see TRID)

HVAC

Heating, ventilation and air conditioning; a set of environmental control equipment like boilers and central air conditioning which usually requires “HVAC specialists” for service

HW

Hot water

ISAOA ATIMA

Its successors and/or assigns, as their interests may appear; often in mortgage/insurance docs

IO

Interest only, a type of mortgage where payments only cover interest (not principal), or the initial time period for an otherwise-amortizing loan during which payments cover only interest

ITL

Inheritance tax lien, an automatic lien placed against RI real estate when someone dies; can be discharged by filing Form T-77, Discharge of Lien Form (and paying any tax due, of course)

IRR

Internal rate of return, the discount rate making all future cash flows from an investment equal to the initial investment, thereby providing an overall rate of return for the investment

IRV

Shorthand for formula: net operating Income = capitalization Rate x Value; same as the formula for calculating capitalization rate: Rate = net operating Income / Value (price)

JT, JTROS

Joint tenancy with rights of survivorship; at death one’s share goes to the other owners

JV

Joint venture, an agreement between business entities to cooperate on a specific project only, instead of having an ongoing partnership which spans multiple projects

LBP

Lead based paint; highly poisonous, used to paint many houses built before 1978

LE

Life estate; ownership for the rest of one’s life, after which it goes to the “remaindermen”

Legal use

How a property may be legally used (commercial, residential, industrial, manufacturing, etc.) and how many units may be rented/occupied; determined by city’s building department not tax assessor

Lien

Claim by one party against a property, recorded in land evidence records; may be voluntary (like a mortgage) or involuntary (like a judgment) and may or may not have a dollar amount specified

LOGS

Letter of good standing, a letter in which the RI Division of Taxation states that all filings and taxes for an individual/entity are up-to-date and paid; often needed for real estate closings, also see COGS

LOI

Letter of intent; a simple offer letter, preliminary to a full P&S and often used for 20+ unit properties

LOMA

Letter of Map Amendment, issued by FEMA when a property has been mistakenly mapped as being in a flood plain, but is actually on natural high ground above the base flood elevation

Love letter

A letter written by a buyer, attempting to influence a seller to accept their offer over others; often discouraged as it may run afoul of fair housing laws

LOX

Letter of explanation, a letter explaining recent credit inquiries or other issues that the borrower submits to the lender/underwriter; sometimes required as part of the mortgage approval process

LL

Leased land; the owner only owns the building, not the underlying land, and s/he pays “land rent”

LLC

Limited liability company, a business entity that contains liability for activities within the company, protecting its members; similar to a corporation but no shareholders and fewer requirements

LP

Limited partnership, an investment structure with one General Partner who manages the investment (and has liability) and Limited Partners who do not manage the investment

LR

Living room

LTOL

Loss to old lease; amount that current rent is below the market rent, a common occurrence

LTR

Long term rental, a rental arrangement (usually with a lease) intended to last at least a month, usually much more; as compared to short term rentals (STR) which are only for days or weeks

LTV

Loan to value, a percentage of the mortgage loan amount divided by the property value; most banks will not go above 80% LTV, though a 65% or 70% is more common for private loans

LUST

Leaking underground storage tanks; most state environmental agencies have a list of known LUSTs and other hazard sites, and it’s good to check this as part of due diligence when buying

MAO

Maximum allowable offer, the most an investor can pay for a property based on the ARV, renovation costs, holding costs, and necessary profit; if an investor goes above MAO s/he may lose money

MBR

Master bedroom

MBS

Mortgage backed securities, also CMBS for commercial MBS and RMBS for residential MBS; packages of mortgages sold to investors on Wall Street which allow more mortgage loans to be made

MBT

Massachusetts business trust, a way for multiple people to invest in property, like the Delaware statutory trust and similar to a limited partnership; aka unincorporated business organization (UBO)

Memo

Memorandum, a letter or notice recorded in land evidence records to notify the public of something regarding a property or entity, such as a “memorandum of trust” summarizing the terms of a trust

MLC

Municipal lien certificate, lists all taxes and bills owed to the city/town including property taxes, special assessments, and (often) water/sewer charges; obtained from city as part of a closing

MLO

Mortgage loan originator, a loan officer or mortgage broker licensed to originate (create) mortgages

MLS

Multiple listing service, the database REALTORS® use to list and sell property

Mortgage

A voluntary lien recorded against a property which is usually associated with a “promissory note” that describes the loan terms; the mortgage “secures” the note (loan) to the property

Mtg

Mortgage

MSA

Metropolitan statistical area, a geographical area which is usually centered around a major city/ies, and is used by the U.S. government in census and economic reporting

NACHO

Acronym for the elements required to gain ownership of a property by adverse possession

NAR

National Association of REALTORS®, nationwide organization that owns the REALTOR® trademark and holds its members to a high standard of professionalism to protect the REALTOR® brand

NOD

Notice of default, a notice/letter sent by a bank to property owners advising them that their mortgage is in default; usually the first step in the foreclosure process

NOI

Net operating income, the rental income from a property after a vacancy allowance (like 5%) and operating expenses are subtracted; used in many calculations like cap rate and DSCR

Nominal

Change in name only, not a true “sale” between unrelated parties; seen in tax assessor records, often for a change in ownership between family members where no money is exchanged

Note

Promissory note, a document describing the terms of a loan such as interest rate, payment amount/frequency, etc.; may be unsecured, or secured by real estate (by recording a mortgage)

NMLS

National Mortgage Licensing System, a system which licenses financial service companies and professionals such as mortgage brokers; you can verify someone’s NMLS credentials

NNN

Triple net, a commercial lease where the tenant pays virtually all property expenses, usually seen with large commercial properties and companies such as Walgreens or CVS

Non-performing

When a borrower fails to make all loan payments on time it is “non-performing”

NSF

Non-sufficient funds, usually stamped on a bounced check when it’s returned

OBO

Or best offer, such as “House has mold, uninhabitable, $30,000 OBO”

OM

Offering memorandum, also known as a private placement memorandum (PPM), summarizes a real estate or other investment for potential buyers/investors

OO

Owner occupied

OOR

Owner of record; may refer to tax assessor record or land evidence records

Op exp

Shorthand for operating expenses, all the expenses that go into renting out and maintaining a property; does not include mortgage payments since those are related to financing, not operations

OZ

Opportunity zone, a (usually lower-income) geographic area in which investments made through an “Opportunity Fund” have favorable tax treatment; created as part of the Tax Cuts and Jobs Act of 2017

Paper street

A street shown on a municipality’s plat map, that was never actually created (it only exists “on paper”)

Performing

When a borrower makes all loan payments on time, the loan is “performing” (versus non-performing)

Plat map

A division of a municipality into larger areas (plats) and then within each plat, into individual parcels (lots); used mainly for assessing taxes and informally identifying properties, it is not a survey

PDTI

Personal debt to income ratio, same thing as DTI; explicitly excludes business entity debt/income

PFS

Personal financial statement, something a borrower fills out for a loan application (and sometimes annually thereafter) which summarizes her/his income, expenses, assets & liabilities

PG

Personal guarantee, something an individual signs to pledge her/his personal assets as extra collateral if the lender has to foreclose – regardless of whether they also signed the note/mortgage

PGI

Potential gross income, the yearly income a property could get, before subtracting vacancy/expenses

Physical occupancy

Percentage of a building’s total units physically occupied by tenants – regardless of whether or not the tenants are actually paying rent; compare to economic occupancy

P&I

Principal and interest; basic components of every mortgage payment; early in a fixed-rate mortgage it’s mostly interest and then toward the end it becomes mostly principal

PITI

Principal, interest, taxes & insurance; the mortgage payment when it includes taxes and insurance

PITIA

Principal, interest, taxes, insurance, and condominium association (HOA) dues; the mortgage payment when it includes taxes, insurance, and HOA dues

P&L

Profit and loss, a financial statement for a person, company, or property summarizing income and expenses for a period such as a quarter or year; also known as an income statement

PMI

Private mortgage insurance, an extra charge required on most conventional mortgages if the down payment is less than a 20%; after the home rises in value it’s possible to eliminate the PMI

POA, LPOA

Power of attorney or limited power of attorney, a document authorizing one person to sign legal documents like deeds on behalf of another (the principal)

POC

Paid outside of closing, a notation on some HUD items indicating they are not included in the totals but are related to the transaction and were paid before or after the closing

POF

Proof of funds; often required to make a “cash only” offer, especially through the MLS

Points

An extra amount paid at the beginning of a mortgage (usually at closing), each point is 1% of the loan amount; often used to get a lower interest rate (to “buy down” the rate)

PPM

Private placement memorandum, a (usually lengthy) document that must be given to potential investors by real estate syndicators, which summarizes the deal and risk factors

PPP

Pre-payment penalty, a clause in a commercial mortgage allowing the lender to charge an extra fee if you pay all or part of the mortgage early; not usually present in RI residential mortgages

PPP

Paycheck protection program, a multi-billion dollar relief program and part of the Coronavirus-related CARES Act designed to encourage businesses to retain employees and contractors

Prime

The prime rate, a variable rate that lending institutions use as a benchmark to determine interest rates offered to borrowers; often expressed as “prime +2%” or “prime -0.5%”

P&S, PSA

Purchase and sales agreement, a legally binding agreement between buyer and seller describing the terms of sale; while RIAR provides one for REALTORS® to use, there is no single “standard” P&S

PTP

Publicly traded partnership, a form of limited partnership whose interests trade publicly like stocks or REIT shares; there are pros and cons to PTPs and subtle differences from REITs

PUD

Planned unit development, a neighborhood of houses/units often developed together and which may have special rules residents must follow

Puffing

Legal “exaggeration” of a property’s characteristics, as opposed to outright misrepresentation, fraud, or concealing material defects, which are all illegal

QC

Quitclaim (deed), where the grantors (sellers) guarantee good real estate title for their ownership period only; makes no guarantees for before that time, and includes no promise to “defend” the title

QE

Quantitative easing, an economic strategy of asset purchases used by various governments during and after the 2008-2010 financial crisis, for stimulating their respective economies

QI

Qualified intermediary, also known as a 1031 exchange agent or accommodator; a person or company that facilitates a 1031 exchange for an investor to ensure compliance with 1031 rules

QM

Qualified mortgage, a designation meaning that a mortgage conforms with “ability to repay” requirements of Dodd-Frank; these mortgages usually have better terms than non-QM loans

QT

Quantitative tightening, an economic strategy of selling assets used by governments to withdraw funds/liquidity from their economies; the opposite of quantitative easing

R1, R2, R3

Zoning or “use” codes for Residential single family, two-family, and three-family; codes vary by city/town so contact the building department for exact meanings or see online zoning ordinances

RC or RCV

Replacement cost (value), an insurance term meaning if there’s a loss you get paid to replace the property as new, as opposed to in its current condition (which would be actual cash value)

Refi

Refinance, to replace one loan (mortgage) with another; usually the new loan has a lower interest rate (payments), and/or the new loan is a higher amount, allowing the owner to receive cash at closing

REIA

Real estate investor association, a group of real estate investors such as RIREIG or Black Diamond REI that meets regularly to network, hear presentations, discuss landlording and legal issues, etc.

REIT

Real estate investment trust; makes investing in commercial real estate like buying stock; must pay out most of its rents to shareholders as dividends and treated as stock (not real estate) for taxes

REO

Bank-owned property; comes from the “real estate owned” bank department which takes over when a property goes to foreclosure and no one bids on it, so the bank becomes the owner

RIAR

Rhode Island Association of Realtors, local membership organization for REALTORS® that helps them with continuing education, MLS support, a library of standard forms, tools like lock boxes, etc.

RICIE

Rhode Island Commercial Information Exchange, a branch of the RI MLS for purely commercial properties (office, industrial, retail, manufacturing, storage, businesses, etc.)

RIGP

Rhode Island General Partnership, a business structure where partners have liability for each other’s actions; required to register in their cities/towns but due to ease of formation often don’t

RIHMFC

Rhode Island Housing and Mortgage Finance Corporation, a quasi-governmental, taxpayer-funded agency which assists homeowners and renters by administering various loan and rental programs

ROI

Return on investment, a general concept meaning the amount of income received each year (after all expenses), divided by the total initial investment; cap rate is a real estate specific measure of ROI

RPAC

REALTORS® Political Action Committee, a lobbying organization that supports pro-REALTOR® candidates and issues; its candidates/agendas usually align closely with real estate investors

RR

Raised ranch, a two-floor version of a ranch-style house with the main living area on the upper level

RR

Right of redemption; in tax assessor records, indicates a property owner had unpaid property taxes and there is now a tax lien holder, but the owner still has the right to “redeem” (pay the back taxes)

RSF

Rentable square feet, the square footage actually usable by tenants, as opposed to common areas or other unusable areas; usually used as part of comparing properties by their rents per square foot

Seasoning

How long a mortgage has been in place and paid on time; as an anti-fraud measure, lenders will often want an existing loan to be “seasoned” for at least a year before allowing a refinance

SD

Security deposit, an amount held by a landlord (which in RI cannot exceed one month’s rent]) to help ensure a tenant leaves an apartment in good condition (except for “normal wear and tear”)

SDIRA

Self-directed individual retirement account, a form of IRA which has special (strict) requirements, but allows someone to invest their IRA in real estate, mortgages, and other non-stock assets

SF, 2F

Single family, 2-family (duplex), etc. – 3F, 4F, and 5F are what you’d expect; investors tend to change to “unit” above 5 units, such as 6U for a 6 unit building or 12U for 12 units

SFH

Single family house

SFR

Single family residence

SO

Sole owner; sometimes seen in tax assessor records

Sold before print

When a listing is already sold by an agent before s/he enters it into the MLS, and it’s only entered for statistical purposes; it’s a reference to when the MLS was distributed as printed books

SoS

Rhode Island Secretary of State, often mentioned in real estate for the corporate database, good standing certificates, and corporation/LLC annual report filings

SS

Stainless steel, or (depending on context) short sale, where a property sells for less than the mortgage balance (i.e., the lender loses money) and which may have tax/legal consequences for the owner

Stabilized

All renovations to a property have been completed, all units are rentable, and most/all units have been rented; lenders usually want a property to be stabilized, and it is a useful point to begin measuring ROI

STR

Short term rental, a rental arrangement intended to only last a few days or weeks and usually less than a month, common examples include Airbnb and Vrbo; compared to long term rentals (LTR)

Subject to

Buying a property with an existing mortgage left in place; allows the buyer to bring much less money to closing since the mortgage isn’t paid off, but is risky in many ways (see “due on sale”)

T12

Trailing 12 months; a report of a property’s actual income and expenses for the past 12 months, as opposed to “pro forma” projections based on assumptions about the future

TAW

Tenancy at will; a month-to-month tenancy, tenant may or may not have an actual lease

TCJA

Tax Cuts and Jobs Act, legislation passed in late 2017 which made many revisions to the tax code

TE, T-by-E

Tenants by the entirety; a special form of joint tenancy for spouses

TI, TIA

Tenant improvements allowance, part of commercial leases saying how much the landlord will pay for tenants to “build out” the rented unit and bring it from “white box” to finished space

TIC

Tenants in common; at death one’s share goes to one’s heirs, as opposed to joint tenants etc.

TIN

Taxpayer identification number, a generic term which means an SSN for a person or EIN for a business

TRID

TILA (truth in lending act) RESPA (real estate settlement procedures act) Integrated Disclosures; consumer protection regulations which took effect October 2015

TT

Tax title; seen in tax assessor records, indicates that the tax title holder paid the property owner’s back taxes and now holds a tax lien on the property

TTE

Trustee (abbreviation), the person in charge of managing a trust’s assets for the benefit of the beneficiaries; s/he has a fiduciary responsibility to the beneficiaries

TTM

Trailing twelve months of financial data on a property; see T12

UAD, u/a/d

Under agreement dated; usually used in conjunction with trusts, such as “The Happy Irrevocable Trust u/a/d Dec 31, 2008”, indicating when the trust agreement was created

UBIT, UBTI

Unrelated business income tax, a special tax a self-directed retirement account has to pay when it gets involved in investments that are non-passive (like operating businesses)

UBO

Unincorporated business organization, another name for a Massachusetts business trust

UFFI

Urea formaldehyde foam insulation, a method of insulation used in the 1970s which has been considered a hazardous material (though some disagree)

Under water

Owing more on a property (mortgages, liens, etc.) than the property is worth; aka “upside down”

Upside down

Owing more on a property (mortgages, liens, etc.) than the property is worth; aka “under water”

URLA

Uniform residential loan application, aka “1003 form”, a standard form used in almost all mortgage applications; usually signed by the borrower at the start of the loan application, and again at closing

UST

Underground storage tanks for heating oil, usually removed by sellers before listing a property or as required by buyers; the main issue is whether they leaked oil into surrounding soil

UW

Underwriting, the process of thoroughly investigating a potential loan or investment’s risks to determine whether to go forward; also, the department of a bank which does this for each new loan

VA

Veterans’ Administration, helps veterans get favorable VA home loans by guaranteeing part of the loan

VDL

Vacant developed lots, vacant land lots that are ready for a builder to construct on

VOE, VVOE

Verification of employment, verbal verification of employment; part of the mortgage application process where the borrower’s employment is verified by contacting the employer directly

VOM

Verification of mortgage, given to a private lender to report on a borrower’s payment history

W/D

Washer/dryer, used to indicate a house or apartment comes with these appliances or has hookups

WD

Warranty deed, where the grantors (sellers) guarantee good real estate title for their ownership period, and for previous owners as well; includes a promise to “defend” the title from any challenges

Disclaimer: Many of the above are legal terms and while the definitions are based on our personal experience, we are not attorneys and we could be wrong. We urge readers to consult an attorney before making real estate decisions.

Also note that REALTOR® is a registered trademark of the National Association of REALTORS®

The following is a method we use to analyze rental (“buy and hold”) properties to check the anticipated rate of return against the risk, looking mainly at capitalization rate (“cap rate”), cash on cash return, and debt service coverage ratio.

(This isn’t an exhaustive analysis method, but is just something quick which allows us to eliminate most properties that cross our desk, and focus on the ones which deserve more time. If you’re actually considering making an offer on a specific property then it’s worthwhile to break out specific expenses, for example finding out the property taxes, getting an insurance quote, etc.)

First, we only look at current rents, never could-be (“pro forma”) rents. One of our favorite phrases is, “if rents could be higher, why aren’t they?” Don’t assume you can raise rents, just because the owner or listing agent claims you can. After all, it’s in their interest to get you to pay more for the property, even if it’s based on empty promises potential rents.

If some of the units are vacant, we’ll try to get a sense of market rents by looking on Craigslist/RentProv/Zillow/etc. We might also ask other investors, if we know anyone with similar properties in the area.

Once we have reasonable monthly rents for each unit, we multiply them by 12 to get yearly gross rents.

We then subtract an amount for yearly operating expenses using an operating expense ratio. We’ll use 50% if the tenants pay for their own heat and electric, or a bit higher if the owner pays for heat or electric (55%), or 60% if owner pays both heat and electric. You’ll sometimes see this referred to online as the “50% rule”.

Note that the “operating expenses” accounted for with that ratio do not include mortgage payments. Different owners may have different financing, and some may have no financing at all. To be accurate and compare one property to another as an operating business, it’s better to look at the financing separately from the income and operating expenses.

If you take the yearly gross rents and subtract an amount for operating expenses based on that ratio, you end up with Net Operating Income (NOI) which is the basis for the three figures we’re aiming at (cap rate, cash on cash return, debt service coverage ratio).

To find the capitalization rate (“cap rate”) you divide the NOI by the purchase price, and you’ll end up with a percentage, usually somewhere between 4 and 12%.

The cap rate is your rate of return if you didn’t have any mortgage payment, and is a way of comparing “apples to apples” between different types of property since the type/amount of financing isn’t included in the calculation. It’s purely a way of saying, “how good or bad is the price, relative to the income left over after operating expenses?”

As a buyer, you want cap rate to be higher because it means you’re getting more of a return for the same price. Of course, as a seller you’d like the cap rate to be lower because it means the buyer is paying more for the same property income.

Everyone wants a cap rate of 10%+ but these days, anything 7% or higher is worth looking at, and we’d consider 6%+ for the right property/area/etc. At this time we wouldn’t look at anything under 6%, but that’s up to you of course.

If the cap rate indicates that the property looks worthy of spending more time on, then you can start to look at the financing aspect.

Here you have to think about what kind of mortgage you’d be getting, how much you’d be putting down as a percentage of the loan amount, what your rate would be, etc. The goal is to calculate the monthly mortgage payment, but also to make sure you can afford the down payment of course.

Usually with an owner-occupied loan, people do 3% of the purchase price as down payment, so the loan is 97% of the purchase price.

With non-owner occupied loans we assume 25% of the purchase price as down payment and 75% of the purchase price as the loan amount. We’ll assume a 30 year term for 2-4 families, or a 25 year term for 5+ units (commercial properties, which have different financing).

You’ll also need to determine an interest rate. The best way is by talking to a mortgage broker about the type of property you’d be looking at (owner occupied, investment etc.), and then they might pull your credit and give you an idea of the rate.

But for quick analysis purposes you can just go online and look for a “market” or “average” rate for a 30 year loan, at a page like 30-Year Fixed-Rate Mortgages Since 1971 (we ignore the Pts column on that page and just look at the Rate column). If it’s more than 5 units we typically add 1 percentage point to the rate.

Using that info (loan amount, term years, and interest rate) you can use any number of websites to calculate the monthly mortgage payment (principal and interest only, without taxes and insurance, since those were already included in operating expenses above). We also have a page for calculating 30 year mortgage payments, and if you’re looking at a shorter term that page also has a downloadable spreadsheet.

Once you have the monthly mortgage payment, multiply it out by 12 to get the yearly mortgage payment which is also known as “annual debt service” or ADS.

If you subtract the yearly mortgage payment (ADS) from net operating income (NOI) you get what we call free cash flow (FCF), which should be what you’d end up with on a yearly basis after all the operating expenses and financing expenses (mortgage) are paid for. Obviously, that should be a positive number 🙂

To get the cash on cash return (CCR) you take the free cash flow (FCF) and divide it by the total amount of money you had to put into the property to get it up and running (i.e., rented out) which we call “initial investment”. With a property that’s rent-ready, that’s just the down payment amount (you can throw in a few thousand for closing costs if you want but we usually don’t). However if you have to put work into the property to get it rent-able, then you should absolutely include that amount in addition to the down payment.

Cash on cash return is a percentage that’s usually 7% or higher; obviously, higher is better. We like to see 10% or higher here, but just like with the cap rate, you have to take the whole picture into account. Maybe you’ll take a lower return if the property is near you, or newly renovated, or in a great area, etc.

Finally, while CCR measures a sort of “real world” return (money you get back compared to money you had to put out initially), the equally-important other side that goes hand-in-hand with CCR in our opinion is the debt service coverage ratio (DSCR), which is a measure of risk.

To get the debt service coverage ratio (DSCR) you divide the NOI by the ADS (yearly mortgage payment). You’ll end up with a number which is usually between 1 and 2. Anything about 1.2 or 1.25 is good, anything under 1.2 is not good. Anything under 1 is very bad.

The DSCR tells you how much of a margin/buffer of safety you have between your net income after operating expenses, and your fixed mortgage payment. If it’s under 1 it means you’re losing money every month. A ratio of 1.25 means you have a 25% buffer between your net income and mortgage payment, in case anything unexpected comes up, before you go cash flow negative for the year. Banks usually like to see 1.25 or higher.

Generally, the more leverage (bigger loan amount) you use to buy a property, the higher your cash on cash return, but the higher your risk (which shows up as a lower DSCR). Higher leverage means you can be involved in more properties for the same amount of money, but it also means, because you have higher loan payments, you have less of a margin of safety in case unexpected things pop up.

In real estate, unexpected things always pop up sooner or later, so to us the DSCR is at least as important, if not a little more important, than the CCR, but that’s our personal preference. We’d rather do fewer deals that are safer, than do a bunch of high-leverage deals but feel like it’s built on a house of cards that could come crashing down if the market turns (e.g., renters start to buy houses again which weakens rental demand and rents).

You may also take market cycles into account here, and be more aggressive (using more leverage) in the early stages of a rising market to acquire more properties, and then shift to be less aggressive (bigger down payments and smaller loans) as the market starts to top out or turn. That’s an excellent strategy, but of course the trick is that it’s not easy to call the bottom or top of a market when you’re in the middle of it (and incredibly easy in hindsight!).

To summarize the formulas/calculations:

yearly gross rent = monthly rents x 12

for monthly rents, only use current rents; for vacant units use Craigslist/RentProv/Zillow/other landlords to estimate

for operating expenses use 50% op ex ratio, or 55%/60% depending on who pays which utilities

net operating income (NOI) = yearly gross rent – operating expenses

cap rate = NOI ÷ purchase price
7%+ is good, 10%+ is great, 6%+ is OK, 5%+ is meh, under 5% is not great

determine % down payment (e.g., 3% or 25% of purchase price)

100% – % down payment = % loan amount (e.g., 97% or 75%)

use above percentages to determine down payment amount and loan amount

determine mortgage rate from mortgage broker or Internet; add 1% for commercial mortgage

determine monthly mortgage payment via Excel or Internet

annual debt service (ADS) = monthly mortgage pmt x 12

free cash flow (FCF) = NOI – ADS

initial investment = down payment + any $ needed to get all units rentable

cash on cash return (CCR) = FCF ÷ initial investment
higher is better obviously, would like to see at least 8%+, 10%+ better; evaluate with DSCR to find right risk-reward balance for you

debt service coverage ratio (DSCR) = NOI ÷ ADS
under 1.2 is bad, 1.2 – 1.25 is OK, 1.3+ is good

When a property is sold in Rhode Island for over $100 a transfer tax must be paid, usually by the seller (RIGL 44-25-1). Proof of payment is stamped on the deed so the recording clerk can see it was paid.

Starting April 1, 2007, deeds had to have the sale price written on the deed itself, which is enforced by city and town clerks who who won’t accept it for recording without the sale price.

For older sales, however, you can indirectly calculate the sale price by using the transfer tax amount on the deed and the tax rate in effect at the time: Sale Price = Tax Stamp Amount ÷ Tax Stamp Rate.

For example, if a deed recorded in 2005 has $640 written in the tax stamps area then the sale price was $640 ÷ 0.004 = $160,000. The table below lists the current and historical tax stamp rates.

* Before Jan 1 1968, the real estate transfer tax was a Federal tax and was 0.55/500 except for two brief periods when there was no tax: 07/01/1902 – 12/01/1914 and 09/08/1916 – 11/30/1917.

Also note that the tax rate technically isn’t specified in $1000 increments but in $X per $500 of the sale price “or fractional part thereof” (see RIGL 44-25-1 Real Estate Conveyance Tax).

Sources for historical rates: RI Division of Taxation, State and Local Taxes: Significant Features (1968), and “Title Searching in Rhode Island” by Daniel J. Donovan (Oct 1987).

Some Rhode Island cities and towns are named like Massachusetts towns, causing confusion when choosing the 4-letter MLS Municipality code, so we made this page to help.

We’ve also listed codes for “all RI cities and towns” at the bottom of the page.

If you have any comments please contact us.

All RI Municipality codes together:

BARR,BRIS,BURR,CFLS,CHAR,CVEN,CRAN,CUMB,EGRN,EPRO,EXET,FOST,GLOC,HOPK,JAME,JOHN,LINC,LCOM,MDLT,NARR,NEWP,NSHM,NKNG,NPRO,NSMF,PAWT,PORT,PROV,ESID,RICH,SCIT,SMTH,SKNG,TIVR,WARN,WARW,WGRN,WWAR,WEST,WOON

Older Rhode Island tax assessor databases will sometimes refer to the “state code” of a property, and in some cases (like Coventry) it’s the only information that will be available for a lot’s type/use. We’ve used the table below for years to “decode” these “state codes” into their actual type/uses:

If you have any that aren’t listed here please contact us.

If you have any that aren’t listed here please contact us.

The following are some alternate names for certain sections (neighborhoods or villages) of Rhode Island cities and towns that we have run across in our travels, and their “proper” cities/towns (for tax purposes).

If you have any that aren’t listed here please contact us.

If you have any that aren’t listed here please contact us.