Property Management Dictionary

# The Property Management Terms You'll Actually Use (And What They Really Mean) **Curated by the Hemlane Education Team** *Last updated: December 2024* After eight years helping landlords manage over 50,000 rental units we have noticed something: most real estate glossaries read like legal textbooks. They define terms nobody uses and skip the ones that come up daily. So we built this differently. Every term here has come up in actual landlord questions, support tickets, or property management situations we've handled. The definitions aren't just technically accurate—they explain what the terms mean in real-world rental situations. We have linked to authoritative sources where relevant: federal housing agencies, state statutes and recognised real estate organisations. Because understanding terminology is not just about knowing definitions, it's about knowing how these concepts actually affect your rental business. --- ## A ### ACH Payment (Automated Clearing House) An electronic bank-to-bank transfer system used for rent collection. According to [NACHA](https://www.nacha.org/), the organisation that governs the ACH network over 29 billion ACH transactions worth $72.6 trillion were processed in 2022. **Why it matters**: ACH payments cost landlords $0-3 per transaction versus 2.5-3% for credit cards. On $1,500 rent that is $3 vs. $45 in fees. **Real-world use**: Through Hemlane 73% of tenants choose ACH for rent payments due to zero tenant fees while credit card usage is typically reserved for when tenants face cash flow issues. ### Adverse Action Notice Required notification when you deny a rental application based on information in a credit report, background check or other consumer report. The [Federal Trade Commission](https://www.ftc.gov/business-guidance/resources/using-consumer-reports-what-landlords-need-know) requires this under the Fair Credit Reporting Act. **What you must include**: - Name of the screening company that provided the report - Notice that the screening company didn't make the decision - Applicant's right to dispute report accuracy - Applicant's right to a free copy of the report within 60 days **Why it matters**: Failing to send proper adverse action notices can result in lawsuits with penalties of $100-$1,000 per violation plus attorney fees. ### Americans with Disabilities Act (ADA) Federal civil rights law that prohibits discrimination based on disability. For rental housing the relevant law is actually the [Fair Housing Act](https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview) which requires landlords to make reasonable accommodations for tenants with disabilities. **Real-world example**: You must allow service animals and emotional support animals even with a no pets policy. You cannot charge pet deposits or fees for these assistance animals but tenants remain responsible for any damage beyond normal wear and tear. ### Appraisal Professional estimate of property value conducted by a licensed appraiser. Regulated by state agencies and you can find yours through the [Appraisal Foundation](https://www.appraisalfoundation.org/). **When you need one**: Refinancing, selling, estate settlement and property tax appeals. Not typically needed for rental management though comparative market analyses help set rent prices. **Cost**: $300-600 for single-family homes $500-1,000 for multi-family properties (2024 rates). ### Assessed Value Value assigned to your property by the local tax assessor for property tax calculation. This often differs from market value. **Why it matters**: If your assessed value is $250,000 and your tax rate is 1.5%, you'll pay $3,750 annually in property taxes—a major expense when calculating rental profitability. **Pro tip**: If the assessed value exceeds the market value significantly you can appeal. According to the [National Taxpayers Union](https://www.ntu.org/) 30-60% of properties are over-assessed but less than 5% of owners appeal. --- ## B ### Building Code Municipal regulations governing construction standards. Managed by local building departments but often based on [International Code Council](https://www.iccsafe.org/) model codes. **Why landlords care**: Violations can prevent you from renting until fixed. Serious violations may make property legally uninhabitable giving tenants grounds to withhold rent or break leases. **Common violations we see**: Missing smoke detectors, inadequate electrical outlets, window egress issues in bedrooms and handrail deficiencies. --- ## C ### Cap Rate (Capitalization Rate) Formula for estimating return on investment is - Net Operating Income ÷ Property Value = Cap Rate. **Example**: Property worth $300,000 generates $24,000 net operating income annually. $24,000 ÷ $300,000 = 0.08 or 8% cap rate **What is good**: Cap rates vary by market but typically: - 4-6%: Lower risk and stable markets (coastal cities) - 7-10%: Moderate risk os return (growing mid-tier cities) - 10%+: Higher risk or emerging markets **Reality check**: Cap rate does not account for mortgage costs so it is just one metric among many. ### Cash-for-Keys An agreement where the landlord pays the tenant to vacate voluntarily avoiding formal eviction. **Typical amounts**: $500-$2,000 depending on market and situation. **Why landlords do this**: Evictions cost $3,500-$10,000 (legal fees, lost rent and damage). Paying $1,000 to get a problem tenant out quickly often saves money and time. **The catch**: Get it in writing. We have seen tenants take the money and refuse to leave, forcing eviction anyway. ### Certificate of Occupancy (CO or C of O) Document from the local government certifying building is safe and code-compliant for occupancy. Required in most jurisdictions before renting. **When you need a new one**: Major renovations, converting garage to living space and changing from owner-occupied to rental (some jurisdictions). **Consequences without one**: Technically illegal to rent in most areas. If discovered tenants may have grounds to withhold rent or break the lease. Insurance might not cover claims. ### Co-signer A person who signs lease agreeing to pay rent if tenant defaults. Often a parent for young renters without credit history. **Legal reality**: Co-signers have the same financial obligations as tenants. You can sue them for unpaid rent just like you would sue the tenant. **How we use them**: Hemlane's system generates separate co-signer agreements automatically. About 12% of our leases include co-signers and most commonly for tenants under 25 or those with credit scores under 650. --- ## D ### Default Failure to meet lease obligations most commonly and not paying rent on time. **Why the term matters**: "Default" triggers specific legal remedies in most leases, including late fees, eviction proceedings and liability for remaining lease payments. ### Depreciation Tax deduction for property wear and tear over time. According to [IRS Publication 527](https://www.irs.gov/publications/p527) residential rental properties depreciate over 27.5 years. **Example**: $275,000 rental property (not counting land value) $275,000 ÷ 27.5 years = $10,000 annual depreciation deduction **Reality**: This is a paper loss that reduces taxable income even though you did not spend the money. Consult a tax professional this stuff gets complicated fast. ### Due Diligence Investigation before buying property: inspections, title search, financial review and zoning verification. **What good due diligence includes**: - Professional home inspection ($400-600) - Pest inspection ($100-150) - Title search and insurance ($500-1,500) - Survey if boundary questions exist ($300-700) - Rent roll and expense history if existing rental - Environmental assessment for commercial properties **Cost of skipping it**: We have seen landlords buy properties with undisclosed foundation issues ($25,000 repair), find out zoning prohibits short-term rentals after closing or discover tenant occupied properties with below-market leases they can not increase for years. --- ## E ### Equity Your ownership stake in a property. Market Value minus Outstanding Mortgage Balance = Equity. **Example**: Property worth $400,000 with $240,000 mortgage is $160,000 equity (40% equity position). **Why it matters**: Equity can be borrowed against (HELOC), used for investment property down payments or cashed out through refinancing. ### Escrow Neutral third party holding funds until transaction conditions are met. Governed by state law to find regulations through your state's [real estate commission](https://www.arello.com/). **Common uses**: - Holding earnest money during property purchase - Holding security deposits in some states - Impound accounts for property taxes and insurance (different meaning, same term) ### Eviction Legal process for removing a tenant who violated lease terms. Process varies by state but is governed by [state landlord-tenant laws](https://www.nolo.com/legal-encyclopedia/overview-landlord-tenant-laws-your-state). **Reality check**: Evictions typically take 30-90 days and cost $3,500-$10,000 including legal fees and lost rent. Prevention through proper screening is infinitely cheaper. **Fair Housing warning**: You cannot evict someone for discriminatory reasons (race, religion, disability and family status etc.). [HUD investigates](https://www.hud.gov/program_offices/fair_housing_equal_opp) discrimination claims aggressively. --- ## F ### Fair Housing Act Federal law prohibits housing discrimination based on race, color, national origin, religion, sex, familial status or disability. Enforced by [HUD's Office of Fair Housing and Equal Opportunity](https://www.hud.gov/program_offices/fair_housing_equal_opp). **What this practically means**: - Can't say "perfect for young couple" (familial status discrimination) - Can't refuse families with children (except qualifying senior housing) - Must accommodate service animals and ESAs - Screening criteria must apply equally to all applicants - Advertising must be neutral **Penalties**: $16,000-$65,000 for first violation up to $150,000 plus for repeat violations, victim compensation and attorney fees. ### Fixed-Term Lease Lease lasting a specific period typically 6 to 12 months. Rent cannot increase during the term unless the lease specifically allows it. **Key point**: When a fixed term ends most leases either renew automatically month-to-month or require notice of non-renewal (typically 30-60 days depending on state law). --- ## G ### Grace Period Time after rent due date before late fees apply. Not required by law in most states, but commonly included in leases. **Typical**: 5 days. Example: Rent due on the 1st and late fee starting on the 6th. **Business reason**: Reduces tenant friction over weekend payment delays or bank processing times while still encouraging on-time payment. ### Guarantor A person who guarantees lease payment obligations, similar to a co-signer but sometimes does not live in the unit. **Common use**: Parent guaranteeing lease for college student or employer guaranteeing lease for relocating employee. **Legal weight**: Just as binding as a co-signer, a guarantor can be pursued for unpaid rent, damages etc. --- ## H ### Habitability (Warranty of) Legal doctrine requiring landlords to maintain properties in a livable condition. Recognized in all states either by statute or case law. **Basic requirements**: - Working heat, water, electricity - Weather-tight structure - Functioning plumbing - Safe electric systems - No health hazards (mold, lead and pests) **Tenant remedies when violated**: Depending on state rent withholding, repair-and-deduct, lease termination or lawsuit. **Learn more**: [Nolo's state-by-state habitability guide](https://www.nolo.com/legal-encyclopedia/state-laws-landlord-tenant-repairs-property-code-requirements.html) ### HOA (Homeowners Association) An organization managing common areas in condos or planned communities. Governed by CC&Rs (Covenants, Conditions and Restrictions) filed with the property deed. **Rental restrictions**: Some HOAs limit or prohibit rentals entirely. ALWAYS check before buying investment property in an HOA community. **Costs**: HOA dues typically $200 to $700/month depending on amenities. These are operating expenses that reduce rental profitability. --- ## I ### Interest Rate This is the percentage charged by the lender on the mortgage principal. As of December 2024 [Freddie Mac reports](https://www.freddiemac.com/pmms) 30-year fixed mortgage rates around 6.5-7%. **Impact on rentals**: Higher rates mean higher mortgage payments requiring higher rents to maintain profitability. The 2022 to 2023 rate spike from 3% to 7% doubled monthly payments on new mortgages. --- ## L ### Late Fee Penalty charged when rent is paid after the grace period expires. State laws often cap these. [Check your state's limits](https://www.nolo.com/legal-encyclopedia/free-books/renters-rights-book/chapter4-3.html). **Common limits**: - California: No specific cap but must be "reasonable." - New York: 5% of monthly rent or less - Texas: No cap, but typically 10% or $50, whichever is greater - Florida: No cap **Hemlane data**: Average late fee among our users is $50 or 5% of rent whichever is greater. ### Lease Legally binding contract between landlord and tenant. Should always be in writing though oral leases are valid in most states (just hard to enforce). **Must include**: - Parties' names - Property address - Rent amount and due date - Lease term/duration - Security deposit amount - Maintenance responsibilities - Landlord contact information (required in most states) **Pro tip**: Use state-specific leases. Generic online leases often miss state-required disclosures. --- ## M ### Month-to-Month Lease Rental agreement that continues monthly until either party provides notice which is typically 30 days. **Advantage for landlords**: Flexibility to adjust rent or end tenancy with proper notice. **Advantage for tenants**: No long-term commitment. **Reality**: Higher turnover risk means many landlords charge 10-15% more for month-to-month versus 12-month leases. --- ## N ### Net Operating Income (NOI) Rental income minus operating expenses excluding mortgage payments. **Formula**: Gross Rental Income - Operating Expenses = NOI **What counts as operating expenses**: Property taxes, insurance, maintenance, property management fees, utilities (if landlord-paid), HOA dues and advertising. **What doesn't count**: Mortgage principal/interest, capital improvements and depreciation. **Why it matters**: Used to calculate the cap rate and evaluate property performance. ### Notice to Vacate Written notice of intent to end tenancy. Required timeframe varies by state and lease type which may typically be 30 to 60 days. **Who can issue**: Either landlord or tenant depending on the situation. **Must be in writing**: Verbal notice does not count in most states. Send certified mail for proof of delivery. --- ## P ### Prorated Rent Partial rent for first or last month when tenant moves mid-month. **Example**: Rent is $1,500/month ($50/day). Tenant moves in on the 20th. 12 days remaining in month × $50 = $600 prorated rent **Formula**: (Monthly Rent ÷ Days in Month) × Days Occupied = Prorated Amount ### Property Manager Professional or company overseeing rental property operations. May be individual with real estate license or property management company. **Typical fees**: 8-12% of monthly rent for full-service management. **What they do**: Tenant screening, rent collection, maintenance coordination, lease enforcement, accounting, sometimes leasing/marketing. **DIY alternative**: Platforms like Hemlane provide software tools for landlords who want to self-manage with professional systems. --- ## S ### Section 8 Housing Federal rental assistance program officially called Housing Choice Voucher Program, administered by local Public Housing Authorities under [HUD oversight](https://www.hud.gov/program_offices/public_indian_housing/programs/hcv). **How it works**: Eligible tenants pay 30% of income toward rent; government pays remainder directly to landlord. **Landlord participation**: Voluntary in most states. Property must pass HUD inspection. Rent limited to Fair Market Rent for the area. **Important**: Some states/cities prohibit "source of income" discrimination, requiring landlords to accept Section 8 tenants. Check local laws. ### Security Deposit Refundable payment held to cover tenant damages or unpaid rent. State laws regulate maximum amounts and return procedures—[see state-by-state guide](https://www.nolo.com/legal-encyclopedia/chart-statestate-security-deposit-laws-1.html). **Common limits**: - California: 2 months' rent (unfurnished), 3 months' (furnished) - 1 month as of July 2024 - New York: 1 month's rent - Florida: No limit - Texas: No limit **Return timeframe**: 14-60 days depending on state. Must include itemized deduction list if withholding any portion. ### Sublease When tenant rents property to another person while remaining liable under original lease. **Key point**: Requires landlord approval in most leases. Original tenant remains responsible even if subtenant doesn't pay. **Common use**: Student goes abroad for semester, sublets apartment rather than breaking lease. --- ## T ### Tenant Screening Process of evaluating rental applicants using credit reports, criminal background checks, eviction history, and employment/income verification. **Must comply with**: [Fair Credit Reporting Act](https://www.ftc.gov/legal-library/browse/statutes/fair-credit-reporting-act) (FCRA), Fair Housing Act, and applicable state laws. **Red flags in our data**: - Credit score under 580 - Debt-to-income ratio over 40% - Eviction history within past 3 years - Criminal convictions for violent crimes or property damage - Income less than 3x monthly rent ### Turnover Period between one tenant moving out and next tenant moving in, including cleaning, repairs, and marketing. **Average costs**: $1,500-$4,000 depending on property condition and market. **Time**: Average 15-30 days for well-maintained properties; 30-60+ days if major repairs needed. **Key metric**: Minimizing turnover is crucial for profitability. Keeping good tenants often beats seeking maximum rent increases. --- ## U ### Utilities Essential services like water, electricity, gas, trash, sewer. **Who pays**: Depends on lease terms and local custom. Single-family homes typically tenant-paid; multi-family often partially landlord-paid (especially water/sewer). **Liability issue**: If landlord-paid, make sure utilities can't be shut off due to tenant issues. Consider requiring tenants to set up accounts in their name even if lease requires landlord payment. --- ## V ### Vacancy Rate Percentage of rentable units currently unoccupied. **Example**: 10 units, 2 vacant = 20% vacancy rate. **Benchmark**: National average apartment vacancy rate fluctuates 5-7% according to [Census Bureau data](https://www.census.gov/housing/hvs/index.html). **Impact**: Every month of vacancy costs one month's rent. On $1,500/month property, 6% vacancy rate costs you $1,080 annually. --- ## W ### Walkthrough Inspection Joint inspection of property with tenant documenting condition at move-in or move-out. **Critical for landlords**: Move-in photos/documentation prove damage wasn't pre-existing when you withhold security deposit. **Best practice**: Use timestamped photos, detailed checklist, both parties sign. Through Hemlane, we provide digital inspection tools that satisfy most state requirements. ### Warranty of Habitability See Habitability above—same concept, different term. --- ## Y ### Yield Return on investment expressed as percentage. **Simple formula**: Annual Rental Income ÷ Property Value = Yield **Example**: Property costs $300,000, generates $24,000 annual rent. $24,000 ÷ $300,000 = 8% yield **Limitation**: Doesn't account for expenses, vacancy, or mortgage costs. Use NOI and cap rate for more accurate analysis. --- ## Z ### Zoning Municipal regulations controlling how land can be used. Administered by local planning/zoning departments. **Common categories**: - Residential (single-family, multi-family, density restrictions) - Commercial - Industrial - Mixed-use **Rental impact**: Some zones prohibit short-term rentals. Some limit occupants per square foot. Always verify zoning allows your intended use before buying. **Variance**: Permission to deviate from zoning rules, granted by local zoning board. --- ## How to Use This Glossary We built this for real-world property management situations. When you encounter an unfamiliar term: 1. Find it here for practical definition 2. Follow linked authoritative sources for detailed regulations 3. Consult attorney or CPA for specific legal/tax situations Real estate law varies significantly by state and locality. This glossary provides general information, not legal advice. When in doubt, consult professionals licensed in your jurisdiction. **About Hemlane**: We provide property management software that automates the technical stuff (rent collection via ACH, lease generation, tenant screening, maintenance tracking) so landlords can focus on building profitable portfolios. [Try free for 14 days](https://www.hemlane.com).