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P

Term Definition
Payback Period
The amount of time it will take, in years, to return your initial investment. * This is based on the 1st year (projected) pre-tax cashflow, and thus is not a very accurate predictor for the true payback period. Payback Period, though, is a good way to compare similar properties to each other.

Penalty
The money a party will have pay for violating part or all of the terms of a contract or breaking a law.

PITI
See Principle, Interest, Taxes, Insurance.

Planned Unit Development (PUD)
A highly designed residential property project that commonly features relatively dense clusters of houses, that are usually surrounded by areas of commonly owned open space and recreational facilities maintained by a nonprofit community association.

Portfolio Loan
A non-conforming loan that must be held by the original because it cannot be sold on the secondary market.

Pre-Tax Leveraged IRR
Measures pre-tax cashflows produced by the property versus your initial investment. This figure does not take into the account the cash proceeds of a sale, and is most relevant when used to analyze a buy and hold investment with a time horizon longer than 20 years.

Prepayment Penalty
The fee charged for paying off a loan early within a specified period of time after the loan has closed.

Present Value of Investment
Future after-tax cashflows produced by the property, including the cash proceeds of sale/disposition, discounted back at the Required Rate of Return.

Present Value of Property
Future NOI produced by the property, discounted back at the Required Rate of Return. If the required rate of return is equal to the buy-in Cap Rate, and NOI is expected to remain stable, PV of property will equal the Purchase Price. If you expect growth in NOI, PV of property will be higher than purchase price, meaning that your Required Rate of Return will be exceeded.

Principal Balance
The current outstanding dollar amount owed on a loan.

Principal, Interest, Taxes, Insurance (P
The monthly payments required by an amortizing loan, and may or may not have taxes and insurance escrowed. Used as a rough calculation in figuring a property's basic expenses.

Private Mortgage Insurance (PMI)
The insurance premium paid by a borrower to protect the lender against losses from loans with loan-to-value(LTV) ratios higher than 80%.

Pro Forma
The presentation of data, such as a balance of income statement, where the amounts are real or hypothetical. For example, a pro forma of a property might show the current rental rates, as well as increased market value of rental rates.

Probate
The process of verifying the validity of a will before a duly authorized court or person. Once validated, the probate court then administers the sale of property as directed by the will or as authorized by the court to settle any and all financial obligations.

Promissory Note
A promise to pay a specific sum to a specific person under specific terms.

Purchase Money Mortgage
A mortgage that secures a note written on a loan used for the purchase of a property.

Purchase Subject to Mortgage
A purchase in which the purchaser agrees to continue making the monthly mortgage payments on an existing mortgage and the original borrower remains liable if the purchaser does not make the payments as agreed.

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