Some Real Estate Terms Definitions

ABATEMENT - In a lease, the reduction or elimination of rent for a period of time. For

example, as an inducement to a tenant to rent a particular space, the landlord may abate

the rent for a period of months while the tenant remodels the space.

ACCELERATED DEPRECIATION - Depreciation methods that allow a taxpayer to take

faster write-offs than with straight-line during the early part of an asset’s useful life.

ACCUMULATED DEPRECIATION - The sum of annual depreciation deductions taken

to date. Also, accrued depreciation.

ADJUSTABLE RATE MORTGAGE (ARM) - A mortgage loan in which the interest rate

is not constant over the life of the loan, but is adjusted periodically according to a

predetermined formula or index.

ADJUSTED BASIS - The original cost of an asset, such as real estate, plus capital

improvements, less accumulated depreciation and costs of sale. The taxable gain at the

time of sale is, in general, the selling price less the adjusted basis.

ADJUSTED GROSS INCOME (AGI) - Gross income less certain adjustments, including

IRA, alimony and Keogh deductions. Used to determine the investor’s passive loss

allowance, which begins to phase out when the investor’s AGI reaches $100,000 and is

completely eliminated at $150,000.

ALTERNATIVE MINIMUM TAX (AMT) - A tax that may be triggered if certain tax

benefits, such as passive losses and accelerated depreciation, reduce an individual’s

income tax liability. You must use Federal tax form 6251 to determine if you are subject

to the Alternative Minimum Tax.

AMORTIZATION - a) The process through which a loan is retired over time through

periodic repayment of the principal. b) The process of taking a partial annual tax

deduction for an item that cannot be expensed in a single year. For example, points paid

to secure a loan must typically be deducted (amortized) over the life of that loan.

ANNUAL DEBT SERVICE (ADS) - The total of all payments on a mortgage loan,

including both interest and principal, for a year.

ANNUAL PROPERTY OPERATING DATA (APOD) - A form that lists a property’s

gross income, individual operating expenses and net operating income. An APOD is

similar to a business profit-and-loss statement.