Every industry has its lingo, and the Austin, Texas real estate industry is no exception to this rule. Whether you're buying a home for yourself or as a rental property, you’ve probably come across a term that you needed an explanation for from your Realtor, lender, etc.
It’s important for anyone interested in investing in Austin, Texas real estate to have a solid foundation and working knowledge of the basic concepts and definitions of terms related to the buying, selling, flipping, etc of homes in Austin!
Below we review the terms and phrases you might regularly hear as you dive more deeply into the real estate investment market here in Austin and expand your network within the industry.
Abandonment - The act of voluntarily surrendering or relinquishing possession of real property without vesting this interest in any other person. If your renter abandons your rental property in Austin, Texas the property code has very specific steps that must be taken when abandonment is suspected, and deviating from these steps can lead to trouble.
Additional insured - a person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured. Your Austin property management company will be named as an ‘additional insured’ party on your landlord insurance policy.
Appreciation (Capital) - an increase in value of an asset such as property or other investment. Generally, home prices tend to increase in the long run, but as with any other investment there are no guarantees of appreciation due to many factors that have to be considered for a given asset
Arbitration - This takes the place of a court hearing and is not the same as Mediation. Arbitration allows both parties to present arguments and tell their side of the story, but the process is much faster and the end result is usually binding. It’s common for an independent third-party attorney who functions more or less like a judge to oversee an arbitration hearing and make a ruling that will be accepted by both parties. This is conducted similarly to a trial with the evidence presented by both sides.
Assistance Animal - an animal that works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects a person’s disability. An assistance animal is not considered a pet. Under the Fair Housing Act, an assistance animal does not have to be trained or certified, and can be any type of animal. See also Emotional Support Animal and Service Dog (Animal)
Breach of Lease - a notice sent to tenants when they violate one or more terms of the lease as a warning with a deadline and instructions to correct the issue
CAP Rate - The cap rate (also known as capitalization rate) is used in real estate to indicate the rate of return that is expected to be generated on a real estate investment property. Cap rate is expressed as a percentage and shows the amount of time it will take for an investor to recoup their initial investment on a property! For example, if your cap rate is 20% that would equate to a period of 5 years to recoup your initial investment in a property!
You can check out our blog for help calculating your cap rate for your Austin rental home!
Comparative Market Analysis (CMA) - A report that estimates the value of a property by using data and past sales/leasing history from comparable homes in the same area! A CMA can easily show landlords what they should be earning in rent every month with their Austin rental home.
Those interested can claim a free market analysis for their Austin rental home from Stone Oak Property Management!
Condo/Condominium - An individually owned unit in a complex or building of units. When you purchase a condo you are purchasing from the perimeter paint on the walls inside the condo and share an ownership interest in the community property in which the unit resides. All condos have varying rules about who is responsible for the infrastructure within the walls that can have a big impact on maintenance costs when something breaks.
Condos are a popular rental unit in places like Downtown and Central Austin where the skyline is full of large residential buildings and a lot of dense, infill construction consists of condo buildings! See also Townhouse
Condo/Home Owners Association (COA/HOA) - the governing body of a condominium or home development that has shared elements. The board members are elected by the residents and have the responsibility to establish and enforce policies, allocate expenses for maintenance, collect association dues from each owner, issue and collect fines for violations if policy, and maintain insurance for the community and common elements among other things
Co-Signer - A cosigner, also known as a Guarantor, is someone who signs a lease with a renter and assumes responsibility to pay the rent if the renter fails to do so. When you cosign someone's lease, you guarantee that you will cover all payable dues owed to the landlord in case the tenant cannot pay up, be that rent or even damages. It’s up to landlords if they want to accept a cosigner on their rental property to allow a tenant who doesn’t quite meet the criteria for the home.
Consult a property manager to discuss if this is a good idea for your rental property!
Deferred Maintenance - Deferred maintenance is a practice of postponing maintenance work to a later date due to the lack of different resources, be it lack of funds, materials or lack of concern.
Deposit Disposition - a letter sent to tenants after they move out giving a breakdown of their deposit and any itemized deductions. Many states have specific requirements and the Texas Property Code requires this to be done within 30 days of a move when certain conditions are met. The penalties for not doing this as required by the property code are VERY steep, so make sure to familiarize yourself with this if you are a self-managed landlord.
Depreciation - Depreciation is the process used to deduct the costs of buying and improving a rental property. Investors buying Austin rental homes can elect to distribute the deduction across the life of the property rather than take one large deduction the year they bought the property.
IRS rules regarding allowable depreciation vary, and you should consult your tax advisor on how to best utilize this tax deduction.
Depreciation generally applies to anything that has a useful life. See also Life Expectancy and take a look at our blog post regarding the life expectancy of your Austin rental property.
Duplex - A house or property that has been divided up into two separate units, each with its own entrance. Duplexes are popular with investors in the Austin, Texas area, and mainly anywhere really.
Early Termination - sometimes lease can or must be terminated early. There are Statutory Rights (see definition) in Texas that allow a lease to be terminated early. There are also circumstances where a tenant may be allowed to find a replacement tenant to fulfill the terms of their lease. Stone Oak’s policies allow for Early Termination via replacement tenant in a manner that minimizes the financial impact to the Landlord.
Emergency Maintenance - repairs that require immediate action from the property manager or landlord without regard to cost in order to protect life or property. Once a given situation is stabilized then standard maintenance protocols apply.
Emotional Support Animal (ESA) - an animal that provides comfort to help relieve a symptom or effect a person’s disability. An ESA differs from a Service Animal since no training is required for ESAs and they do not need to be formally trained to mitigate mental illness. Any animal that provides, support, comfort, or aid, to an individual through companionship, unconditional positive regard, and affection may be regarded as an ESA. See also Assistance Animal and Service Animal
Eviction - The act of expelling someone, such as a tenant, from a rental property. Evictions in Austin are handled by the Justice of the Peace Court in Travis County and the other surrounding counties. You can learn which Justice of the Peace court handles your property’s evictions by using the online tools that the Counties provide. Learn more about how the eviction process in Travis and Williamson County works.
Eviction Notice - A formal notice of eviction that is served by a Constable in Texas to notify the tenant an eviction suit has been filed and requiring them to appear before the Justice of the Peace Court.
Fair Housing Act - The Fair Housing Act declares a national policy of fair housing throughout the United States. The law makes illegal any discrimination in the sale, lease, or rental of housing, or making housing otherwise unavailable, because of race, color, religion, sex, handicap, familial status, or national origin.
Fair Market Value - Simply put, the Fair Market Value (FMV) of an Austin rental property is generally the price the property would sell for if it hit the open market.
Austin’s real estate market is currently hot (that’s an understatement) so determining FMV without the help of the market is nearly impossible and during these times, most investors may be surprised what FMV equals during this unprecedented market in 2021.
Holdover Tenant - A holdover tenant is a renter who remains in a property after the expiration of the lease. If the landlord continues to accept rent payments, the holdover tenant can continue to legally occupy the property, and state laws and court rulings determine the length of the holdover tenant's new rental term.
Home Owners Association (HOA) - Similar to Condo Owners Association, but for communities of homes rather than condos. See Condo Owners Association (COA)
Home Warranty - a contract with a third party that is supposed to cover certain repairs. Home Warranties can seem like a good deal, but should you get a home warranty for your Austin, TX rental home?
Inventory and Condition Form - a standard form provided to tenants at the start of a new lease where they will document the condition of the home and turn that into the manager/landlord within a given amount of time. This is not a maintenance request, rather it is only to document the condition and is referred to when a tenant moves out.
Justice of the Peace Court (JP Court) - also known as small claims court that handles minor civil and criminal cases, this is typically where an eviction hearing takes place in Texas counties when a case involves an amount between $200 and $10,000. The judge is known as the Justice of the Peace and is typically elected in County-level elections. Before you can file an eviction you'll want to know which JP court precinct your Austin, TX rental property is in!
Landlord - A person who rents their land, property or dwelling to a tenant in exchange for money. This may be you already or you may be planning on becoming a landlord!
Lease - An oral or written contract between a landlord and his tenant that provides the tenant with the right of exclusive possession of the home for a specific duration of time. The best practice is to always have your lease agreement drawn up in writing.
Lease Extension - an agreement between the landlord and tenant to extend the terms of the current lease, typically by a few months to a year. See also Lease Renewal
Lease Fee - a commission paid to the listing broker to find a tenant. This fee is usually shared between the listing broker and the tenant’s agent. Stone Oak does not retain any of this fee and it is separate from the management fee.
Lease Renewal - Unlike an extension, a lease renewal is a new lease agreement between the owner and tenant. Generally speaking, the practical effect of either is that the parties to the lease continue the landlord-tenant relationship beyond the expiration of the original term of the lease.
Lease Renewal or Extension Fee - a fee charged by a property manager to go through the process of extending or renewing a tenant’s lease. This can be a flat fee or a percentage of rent. Stone Oak charges a flat fee for the administrative tasks for this, and always pursue this as retaining tenants is in our client’s best interest. See also Tenant Retention
Lease Term - A lease term is a duration of time set out in the lease that designates the minimum amount of time a tenant is expected to remain in a rental property. Lease terms can be renewed after the full term is complete, however, there's usually a penalty for terminating a lease before the completion of the full term.
Tenants may sometimes try to sublet their unit to another individual to take over their lease. Be very cautious if you think you’ll allow something like this to happen on your property.
Leasing Agent - A licensed real estate agent who leases property and has the authority to sign on the behalf of the landlord. Typically this person handles placing a tenant in a rental home and then turns the property over to a manager or the landlord for the duration of the lease.
Life Expectancy - the approximate useful life of a given item. This can vary greatly based on quality, materials, and incurred wear and tear. See also Depreciation, Normal Wear and Tear, and our blog post on the Life Expectancy of Your Austin Rental Home.
Maintenance Reserve - Money held in a trust account on behalf of an owner that is used for repairs. This helps management companies facilitate repairs faster without having to first receive approval from a landlord for minor repairs.
With that said, any major repair or work that is done to a home should first be run by the owner of the home. At Stone Oak Property Management, we generally hold a reserve of $300 for our owners on their accounts. This allows us to make quick repairs to the property should a tenant contact us with any issue. If the cost of the repair exceeds this amount, you will receive a call from your designated property manager to first approve this work. The main exception to this policy is for emergency repairs that require immediate action to protect life or property. See also Emergency Maintenance
Management Fee - The agreed-upon amount in which a property owner pays a property management company to manage their rental home(s) or properties. This fee can range anywhere from a flat monthly dollar amount up to a hefty percentage of the monthly rent.
Austin, Texas has many choices for property management companies, all with their own different fee structures and pricing models. Be wary of paying too little or too much for your property management. That may sound odd, but how reliably will your property manager answer their phone at 3 am when your tenant is having an emergency if they are only charging you $50/month? On the other hand, you must hate making money if you're signing up for a property management company that charges 9-10% of your monthly rent in Austin.
Learn more about the fees and pricing for Austin property management!
Mediation - a process meant to keep two disputing parties out of court by trying to resolve minor issues with the involvement of a third party. Mediation is non-binding and the parties retain the right to go to court if they are unable to settle on a solution acceptable to both parties. See also Arbitration
Multi-Family Residential (MFR) - a structure used for residential purposes with 2 or more units that are separate living spaces. See also Duplex and Single Family Residential (SFR)
Normal Wear and Tear - a vague term regarding allowable and expected deterioration that happens over time. Tenants cannot be charged for this, and determining what is and is not normal wear and tear is not easily defined. See our blog post about Wear & Tear vs. Damage to a Rental Home.
Notice to Vacate - this notice or letter is the first step in the eviction process in Texas. The timeline given to tenants is typically a 3-day notice after an event has occurred such as non-payment of rent, etc. Always be sure to check the lease in place, and any relevant laws, with your tenant to verify the number of days that need to be given for proper notice.
Paupers Affidavit - a sworn statement given by a tenant during the eviction process that states they are unable to pay the costs of appeal or file an appeal bond. The process does allow a landlord to contest with the tenant having the burden to prove their claim through evidence and/or credible testimony.
Personal Property - Things that are not attached to the property, like a gas grill or refrigerator are considered personal property. See also Real Property
Pet Agreement - an addendum to a lease that documents, spells out the terms, and allows a pet or other animals to live at the property. This can include increasing the rent, adding an additional deposit, charging a recurring fee or a one-time fee to cover the additional wear and tear on the property.
Preventative Maintenance - the act of doing maintenance in order to avoid more expensive issues due to breakdown. Most maintenance is done reactively, but certain things we do on a regular basis without thinking about it are preventative such as changing AC filters and water filters. This type of maintenance helps to lengthen the life of the equipment and can help to catch other issues before a breakdown occurs. Stone Oak offers HVAC seasonal preventative maintenance to our clients through our trusted vendors, and we have other options such as preventative sewer line cleaning, pest control, etc. See also Property Maintenance
Property Maintenance - a service you contract for when a repair is needed. Repairs are typically done on a reactive basis, but there are options to lower long-term repair costs by proactively doing Preventative Maintenance. If you’re a busy commercial property owner or landlord, it’s a workable solution to help preserve the top-notch condition of your real estate asset. See also Preventative Maintenance
Property Management Agreement - An agreement between a landlord and a third party, usually a property management company, that gives the company the legal right to manage the property in place of the landlord for a monthly or agreed-upon fee.
Property Management - Property management is the daily oversight of residential, commercial, or industrial real estate by a third-party contractor. Generally, property managers collect rents and take responsibility for day-to-day repairs and ongoing maintenance, security, and upkeep of properties. They usually work for the owners of investment properties such as apartment and condominium complexes, private home communities, single-family homes, shopping centers, and industrial parks.
Property Manager - A property manager is an individual or company that is hired to oversee the day-to-day operations of real estate. Property owners and real estate investors typically hire property managers when they are unwilling or unable to manage the properties themselves. The cost of employing a property manager is often tax-deductible against the income generated by the property.
Property Tax - in Texas taxes are assessed on real property each year based on an assigned value given by the local county appraisal district. Personal property is also taxable for businesses but generally doesn’t apply to residential rental properties. See also Personal Property, Real Property, Property Tax Appraisal, and Tax Protest
Property Tax Appraisal - in Texas this is an annual determination of value issued by the county that the property is in that is used to impose property taxes each year. See also Property Tax and Tax Protest
Real Property - Generally defined as the physical land and permanently attached improvements. This does not include appliances or any other items easily removed. See also Personal Property
Reasonable Accommodation - a request by an applicant or tenant to change or modify a rule, policy, practice, or service to afford a person with a disability an equal opportunity to enjoy a dwelling. Some examples are allowing a ramp for a wheelchair, or allowing a service or emotional support animal in a property that doesn’t otherwise allow pets. See also Fair Housing Act
Rent - A tenant's regular payment to a landlord for the use of property or land. Rent is the lifeblood of your Austin rental property(s). Things are great as long as the monthly rent is coming in consistently!
It’s important to take screening your tenant seriously to weed out those with an inclination to default on their rent. For best practices about screening tenants for your Austin rental property don’t hesitate to contact an Austin property manager.
Renters Insurance - Renters insurance is a form of insurance coverage that can help a tenant pay for things beyond their control. There are several types of coverage available, but many will assist the tenant with replacing their contents in the event of a flood or fire as well as provide them with a place to live while repairs are being made. Renters insurance is something that all landlords should require of their tenants.
Section 8 - A federally funded rental assistance program that pays private landlords the difference between what a low-income household can contribute and the fair market rent. Not every rental property accepts section 8 and as a landlord, you aren’t required to do so.
Offering your property as a home that accepts section 8 is a decision the landlord makes. It’s important to consider several factors before deciding to do so or not.
Security Deposit - a payment in advance to protect a landlord from a tenant’s non-performance of the lease contract that can also be used to cover damages to the home after a move-out. Texas Property Code governs these funds with strict rules enforced by the JP Courts. See also Justice of the Peace Court and Texas Property Code
Service Animal - a general term for an animal that provides physical or mental support to people with disabilities. These animals can have specific training but are not required to. See also Assistance Animal, Fair Housing Act, and Reasonable Accommodation
Short Term Rental (STR) - generally defined as a rental or lease for less than 30 consecutive days. Stone Oak does not manage STRs and does not allow tenants in properties we manage to use a rental property for this purpose.
Single Family Residential (SFR) - A structure with only one living unit. See also Multi-Family Residential (MFR) The abbreviated form of Single-Family Residence. When working with a residential Austin property management company, typically the bulk of their portfolio will be made up of single-family rental homes. That’s not to say they don’t manage other unit types, only that the bulk of rental properties in Austin, Texas are made up of SFR properties!
Special Statutory Rights - the Texas Property Code allows early termination a residential lease under certain circumstances including Military orders, Family Violence, Sex Offenses or Stalking. While these are rare they do happen, and must be allowed by law.
Tax Protest - the right and process of arguing the value given by the county appraisal district in an effort to reduce the assigned value thus reducing the property taxes due each year. This can be done by a property owner or by an agent who is hired on a fee basis. Stone Oak includes this as an option for our clients at a very competitive rate that is only charged on a contingency of any tax savings. If you don’t benefit from the process in the form of a reduced tax bill there is no cost! See also Property Tax and Property Tax Appraisal
Tenant - A person who occupies property or land that is rented from a landlord, or property owner. Finding great tenants for your Austin rental home is the best way to ensure your rental property experiences continued success.
Tenant Agent - a licensed agent or broker who represents a tenant when a property is available for lease and is compensated by the Leasing Agent from a portion of the Lease Fee. See also Leasing Agent and Lease Fee
Tenant Chargeback - the act of having a tenant pay for a repair or other item that they are responsible for under the lease. The standard lease used by Texas real estate agents defines what landlords and tenants are responsible for, but defining every possible item isn’t possible.
Tenant Ledger - A ledger shows an accounting of money either owed to or from a person. In this case, the tenant’s ledger will show money they may owe for rent, repairs or maybe late charges. A good property management company will keep an accurate tenant ledger.
Tenant Retention - the act of keeping a tenant in place as long as possible. It is in the landlord’s best interest to keep a tenant in place for as long as possible. See also Lease Renewal, Lease Extension, and Turnover
Texas Property Code - the state laws regarding all property of which residential tenancies are just one section. This is the bulk of the rules and regulations, however, local county and city governments will have their own code that must be followed in addition to the state requirements.
Texas Real Estate Commission (TREC) - the state’s governing body that licenses Real Estate agents and brokers designed to safeguard consumers in matters of real property transactions. In Texas, only a licensed Broker can manage properties for third parties with some exceptions. See also Trust Account
Townhouse - Townhouses are multi-floor homes that share one to two walls with adjacent properties but have their own entrances. In the suburbs, townhouses are often uniform homes built in a distinct community that may have its own homeowners’ association. See also Condominium and COA/HOA
Another popular type of rental unit available across Austin! Your property management company should have no issues handling the management for this type of property.
Turnover - the process and period of vacancy when putting a new tenant in a property. Stone Oak’s policies are to minimize this as turnover can be expensive and isn’t in the best interest of our clients. See also Lease Extension, Lease Renewal, and Tenant Retention
Trust Account - a type of bank account that a licensed Broker in Texas must maintain to hold client funds in trust, and cannot be commingled with the property management company’s funds. See also Texas Real Estate Commission
Writ of Possession - The writ of possession is the process of removing a tenant from a home after an eviction has been filed and won in court by a landlord. Many landlords believe that once an eviction has been won in the JP courts that the property is now theirs again - only on paper.
In Texas, once you are through the eviction process, landlords must file their judgment with the appropriate Constable's office. The constable will then schedule a date in which they will meet you at the property to remove the tenant and all of their personal belongings from the property. This can be a messy process so make sure you are prepared by having a moving company on hand and a locksmith there to change the locks.
Being a landlord in Austin can be hands-off and stress-free with the right property manager. Contact Stone Oak Property Management today to learn about our services for property owners across Greater Austin, Texas!