investing in texas real estate

Real estate investment terms you should know

Every potential real estate investor should become versed in the terms of the trade. Understanding these can mean the difference between a profitable investment and a one that barely pays for itself.

Cash flow is the difference between your rental income and your expenses to operate the property.

Amortization is the process of gradually paying off the principal on the mortgage--and gaining equity as you go.

Leverage is using other people's money to gain control of a property. You put down, say, 20 percent to 25 percent of your own money but gain 100 percent control of the property and the income it produces.

Appreciation is the growth in value of a property, often resulting from inflation or market demand.

Lease option arrangements give you the opportunity to take control of a property (and perhaps sublease it for a small profit) before you buy it. It can be a good way to "try out" a market you're considering investing in. Often, lease-options are structured so that a portion of your lease payment is credited toward your downpayment when you eventually do buy.