Real Estate Investment Glossary (2025)

At Ratio, we are participating in the digital transformation of the real estate market, introducing products and technology to optimize key areas of project development in the sector.

One of these areas is real estate investment, traditionally marked by high entry barriers, a lack of institutional-level project offerings, and little transparency from intermediaries and developers. 

In this context, our Investment Club emerges as a platform designed for individual investors, family offices, and funds from anywhere in the world to access the best local opportunities completely digitally, within a secure environment with all the quality and profitability guarantees, as the projects are validated by Ratio's technology and team.

Why do you need this glossary?

At Ratio, we believe democratizing real estate investment is not just about opening doors, but also facilitating knowledge. To this end, we have created this essential glossary: an updated guide that brings together the key terms every novice or professional investor should know when understanding, analyzing, comparing, and participating in real estate projects in an increasingly global and digitized market.

In short, this glossary will help you to:

• Clarify technical terms of the sector

• Make more informed investment decisions

• Navigate with confidence in an increasingly global and digital real estate world

Real Estate Investment Glossary | Updated 2025

Illiquid Asset

Asset that cannot be easily sold or converted into cash without a significant loss of value.

Liquid Asset

Asset that can be quickly converted into cash without losing value.

Real Estate Assets

Real estate such as land, buildings, or properties that generate income or appreciate in value.

Sensitivity Analysis

Assessment of how changes in key variables affect investment performance.

Financial Leverage

Use of debt to finance an investment and increase its profitability.

Benchmark

Reference or standard with which investment returns are compared.

Cap Rate (Capitalization Rate)

Ratio between the net operating income of an asset and its market value.

Cash Flow

Net income generated by a property after operating expenses.

Real Estate Cycle

Phases of the real estate market: expansion, peak, contraction, and recovery.

Coliving

Investment model in properties designed for shared housing with common services.

Core Investment

Real estate investment with a minimum risk profile, focused on established properties generating stable cash flow.

Core Plus Investment

Real estate investment with a moderate risk profile, focused on properties that can increase cash flow generation by improving, optimizing processes, and achieving greater management efficiency.

Opportunity Cost

Benefit lost when choosing one investment over another alternative.

Replacement Cost

Estimated cost to replace an asset with another of similar characteristics.

Crowdequity

Collective financing that grants equity participation to investors.

Real Estate Crowdfunding

Collective financing of real estate projects through digital platforms.

Portfolio Diversification

Strategy that reduces risk by investing in different types of assets.

Due Diligence

Detailed review process of an asset before an investment or acquisition.

ESG (Environmental, Social, Governance)

Sustainability criteria for environmental, social, and governance.

Operational Efficiency

An asset's ability to generate income while minimizing expenses.

Exit Strategy

Plan to recoup investment and make profits at the end of the project.

Bridge Financing

Temporary loan until obtaining long-term financing.

Real Estate Investment Trusts (REITs)

Vehicles that pool capital to invest in real estate assets and distribute rents.

Discounted Cash Flow (DCF) Valuation Formula

Method that estimates an asset's value by discounting future cash flows.

Commercial Mortgage

Loan to acquire, develop, or refinance commercial properties.

Holding Period

Time an investment is maintained before being sold.

Net Operating Income (NOI)

Income from a property minus its operating costs.

Direct Investment

Participation in assets without intermediaries, offering greater control and responsibility.

Indirect Investment

Participation in assets through funds or other structures.

Liquidity Event

Opportunity to convert an investment into cash (e.g., sale or repurchase).

Liquidity

Ease with which an asset can be converted into cash.

Loan to Value (LTV)

Ratio between the loan received and the value of the financed asset.

Real Estate Marketplace

Digital platform where real estate assets are bought, sold, or invested in.

Performance Metrics

Key indicators for evaluating an investment's performance (e.g., profitability, occupancy).

Investment Multiplier

Ratio between the capital invested and the total return obtained.

Opportunistic Investment

Real estate investment with the highest risk profile, focused on properties that require significant added value and professional management. These assets do not generate cash flows in the short term but have the potential to be very high in the medium to long term.

Net Worth

Difference between an investor's or company's assets and liabilities.

Grace Period

Initial period where no interest or principal is paid on a loan.

Proptech

Technology applied to the real estate sector to improve processes and experiences.

Expected Return

Return expected from an investment based on prior analysis.

Vacancy Risk

Risk that a property will be unoccupied and not generate income.

Return on Investment (ROI)

Profitability of an investment relative to its initial cost.

Scenario Simulation

Projection of results under different market conditions.

Smart Contracts

Self-executing digital contracts stored on blockchain.

Special Purpose Vehicle (SPV)

Entity created to manage a specific asset and isolate risks.

Internal Rate of Return (IRR)

Key indicator estimating the expected annual return of an investment, considering all projected cash flows. It represents the return an investor expects to achieve at the project's conclusion.

Asset Tokenization

Conversion of a physical asset into exchangeable digital units (tokens).

Residual Value

Estimated value of an asset at the end of the investment period.

Valuation

Estimation of the economic value of a property.

Value Add Investment

Real estate investment with a medium-high risk profile, focused on properties that do not generate cash flows at the time of acquisition but have high potential for it once the value is added by the investor: renovations or repairs, management improvements, solving legal problems... etc.

Investment Vehicle

Legal structure used to invest in assets (funds, companies, SPVs).

Yield

Gross or net return of a real estate investment.

- - -

The real estate sector is changing and more innovative investors are demanding digital alternatives that help improve the quality and efficiency of their operations. 

If you are one of them, we invite you to be part of the future of real estate investment with Ratio. Complete your application and join our Investment Club now.