Glossary

Quick definitions of key investing terms
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Glossary

Acquisition Costs

The total costs involved in buying a property, in addition to the purchase price. These usually include real estate transfer tax, title insurance, attorney or escrow fees, appraisal costs and related charges. For fractional investors, acquisition costs are built into the overall funding target.

Glossary

Annualized Return

Annualized return shows the steady percentage an investment grows per year, assuming compounding, even if it was held for several years. It allows fair comparison between investments of different lengths. For example, if $1,000 grows to $1,229 over three years, the annualized return is about 7.1% per year.

Glossary

Capital Appreciation

The increase in a property’s value over time, realized when it is sold. For example, if a property is bought at $400,000 and sold five years later at $500,000, the capital appreciation is $100,000 (25% overall), which equates to an annualized growth rate of about 4.6% per year.

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Cash Flow

The net income generated from a property after deducting operating expenses such as taxes, insurance and maintenance. Positive cash flow means the property produces surplus income, which can be distributed to investors.

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Net Yield

The annual percentage return a property generates after all expenses are deducted from rental income. Example: The property is priced at $300,000. If gross rent is $24,000 a year and expenses are $6,000, net rent is $18,000. Net yield = 18,000 ÷ 300,000 = 6%.

Glossary

Purchase Price

The agreed-upon amount paid to acquire a property, excluding additional costs such as taxes, title fees and closing expenses.

Glossary

Return on Investment (ROI)

How much you actually earn on your investment overall. It’s shown as a percentage: ROI = total profit ÷ amount invested (where profit is net rent received plus any net gain at sale). Example: if you invest $1,000 and get $1,300 back in total → profit $300 → ROI 30%.

Glossary

Total Return

How much you earn overall on your investment over the whole holding period. It adds up every rental distribution paid to you during the hold (for example, quarterly over five years) plus your share of the net gain at sale). Example: if you invest $1,000 and get $1,300 back in total → profit $300 → ROI 30%.

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Glossary
K

K-1 Form (Schedule K-1)

A tax form issued by Limited Liability Companies (LLCs) and partnerships to report each investor’s share of income, deductions and credits. Fractional real estate investors receive a Schedule K-1 each year to include their investment income on their individual tax return filed with the IRS.

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K

Kafalah (Shariah-Compliant Guarantee)

A contract of guarantee where a guarantor (kafil) agrees to assume responsibility for an obligation if the primary party fails. It is conceptually similar to a tenancy guarantor.

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K

Key Performance Indicators (KPIs)

A metric used to track deal performance, such as occupancy rate, rent collection rate, net yield, expense ratio or dividend yield.

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K

Key Tenant

A tenant that occupies a significant portion of a property or provides long-term stability to rental income. In residential buildings, key tenants are often reliable, long-term renters who contribute to steady cash flow.

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K

Know Your Customer (KYC)

Identity and source-of-funds checks completed before you can invest. KYC helps confirm who you are and that investment money comes from lawful sources.

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L

Lease Agreement

A legally binding contract between a landlord and a tenant outlining rental terms such as duration, rent amount, payment schedule and maintenance responsibilities.

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Leasehold

A form of property ownership where the buyer owns the right to occupy and use the property for a fixed term under a lease but does not own the land. While more common in the UK, leaseholds in the US typically apply to certain condos or ground lease arrangements.

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L

Legal Title

The official ownership of a property recorded in public land records. Title is transferred at closing and verified by a title company to ensure the property is free from liens or disputes.

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Letter of Intent (LOI)

A non-binding agreement that outlines the key terms of a potential property purchase before a formal contract is signed. It signals serious interest and helps both parties align on price and conditions before due diligence begins.

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Liabilities

Financial obligations owed by a property or business, such as taxes, payables or accrued expenses. In an unleveraged (debt-free) real estate model, liabilities are typically limited to operating costs.

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L

Limited Liability Company (LLC)

A legal entity commonly used to hold fractional real estate in the US. It protects investors from personal liability, meaning their risk is limited to the amount they invested, while allowing income and losses to pass through for tax purposes.

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L

Liquidity

Liquidity describes how quickly and easily you can convert an asset into cash without significant price reductions.

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L

Listing Price

The advertised price of a property when placed on the market for sale. It may differ from the appraised value or the eventual sale price depending on demand and negotiations.

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M

Maintenance

Routine and preventive work carried out to keep a property in good condition. This includes repairs, servicing of HVAC systems, painting and upkeep of shared areas.

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M

Management Fee

A fee charged by the investment manager for overseeing day-to-day operations, tenant relations and investor reporting. It is taken from rental income before dividends.

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M

Market Rent

The amount a property can reasonably earn in rent based on current market conditions and comparable properties in the same area. Market rent may differ from the rent currently charged if leases are outdated or below market value.

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M

Market Value

The estimated selling price of a property, based on what buyers are willing to pay and what sellers are willing to accept. Used to price deals and assess performance at exit.

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M

Material Facts

Information that could influence a buyer’s or investor’s decision to purchase a property. US law requires that sellers and managers disclose material facts such as structural defects, known hazards or legal disputes.

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M

Mortgage-Free (Unleveraged)

Owning a property outright without any debt or mortgage.

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M

Mudarabah

A profit-sharing partnership where one party (the investor or Rab-ul-Maal) supplies the funds while the other party (the entrepreneur or Mudarib) manages the investment, with profits shared according to a pre-agreed ratio.

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M

Multi-Family Property

A residential building with multiple separate living units, such as an apartment complex or duplex.

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M

Murabaha

Murabaha is an Islamic finance contract where a financing party buys an asset and then sells it to a client at a pre-agreed price plus a profit markup, allowing the client to pay in installments over time without interest.

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M

Musharakah

An equity partnership where all partners contribute capital to a joint venture and share both the profits and losses according to a pre-agreed ratio.

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N

NAV (Net Asset Value)

The total value of an LLC’s assets minus its liabilities, divided by the number of investor shares. NAV reflects the current underlying value of each investor’s ownership in the property and is updated periodically based on appraisals and performance.

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Net Operating Income (NOI)

Annual income from the property after operating expenses, before tax and any financing. In our zero-debt model, NOI closely tracks the cash available for dividends and reserves.

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Net Present Value (NPV)

A financial measure used to determine the value of an investment by calculating the present value of future cash flows, discounted at a chosen rate. A positive NPV indicates that an investment is expected to be profitable over time.

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Net Yield

The annual percentage return a property generates after all expenses are deducted from rental income. Example: The property is priced at $300,000. If gross rent is $24,000 a year and expenses are $6,000, net rent is $18,000. Net yield = 18,000 ÷ 300,000 = 6%.

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Non-Accredited Investor

An investor who does not meet the SEC’s accredited investor thresholds but can still participate in certain regulated offerings such as Regulation A. Limits apply to how much can be invested each year based on income and net worth.

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N

Notarization

The official process of verifying the authenticity of signatures on legal documents, such as deeds or operating agreements.

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Notice Period (Lease)

The amount of time required for either landlord or tenant to give notice before ending or renewing a lease.

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O

Occupancy Rate

The share of time a property is rented in a period. Example: if the property is occupied for 11 of 12 months, the occupancy rate would be 91.7%. Higher occupancy supports steadier cash flow.

Glossary
O

Offer Document

A formal disclosure provided to potential investors outlining key property details, investment structure, financials, risks and fees. In the US, this is referred to as an Offering Circular under SEC Regulation A, which must be filed and qualified before public investment can begin.

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O

Operating Agreement

The governing document for a Limited Liability Company (LLC) that defines the rights and responsibilities of members, voting powers, profit distribution and management duties.

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O

Operating Expenses

The recurring costs involved in running a property, including property taxes, insurance, repairs, utilities, management fees and HOA dues. These are deducted from rental income to calculate Net Operating Income (NOI).

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O

Opportunity Zone

A designated area identified by the US government to encourage long-term investment and economic development through tax incentives. Investors may defer or reduce capital gains taxes by investing in qualified Opportunity Zone funds or properties.

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O

Option to Renew (Lease)

A clause that gives tenants the right to extend their lease for an additional term under specified conditions. Renewal options help maintain occupancy and rental income stability.

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P

Passive Income

Earnings generated from investments that require minimal day-to-day involvement.

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P

Portfolio

A collection of property investments held by an investor. Diversifying a portfolio across locations or unit types can help spread risk.

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P

Pre-Tax Return

The total return earned from an investment before accounting for any taxes on rental income or capital gains. It provides a standard basis for comparing investment opportunities across different regions or structures.

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P

Prime Location

A highly desirable area characterized by strong demand, good connectivity, local amenities and consistent property value growth.

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P

Pro Forma

A financial projection that estimates a property’s future income, expenses and returns. Pro formas are used to model expected performance and help investors assess potential returns before investing.

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P

Pro Rata

A method of allocation based on each investor’s proportional ownership. For example, an investor holding 2% of an LLC will receive 2% of all distributions and profits.

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P

Profit and Loss (P&L)

A financial statement that summarizes the revenues, expenses and net income generated over a given period. It helps evaluate a property’s profitability and performance.

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P

Property Manager

A professional or company responsible for managing a property’s day-to-day operations, including tenant relations, rent collection, maintenance and compliance with local regulations.

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P

Property Taxes

Recurring taxes levied by local governments based on the assessed value of a property. These taxes fund public services such as schools, roads, and emergency services and are a standard operating expense in the US real estate.

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P

Purchase Agreement

A legally binding contract outlining the terms and conditions of a property sale between buyer and seller, including price, contingencies and closing timeline.

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P

Purchase Price

The agreed-upon amount paid to acquire a property, excluding additional costs such as taxes, title fees and closing expenses.

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Q

Qard al-Hasan

An Islamic finance term for an interest-free loan. In a qard al-hasan transaction, the borrower repays the principal amount of the loan without any interest or markup.

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Q

Qualified Opportunity Fund (QOF)

An investment vehicle that allows investors to reinvest capital gains into properties or businesses located in federally designated Opportunity Zones. In return, investors may receive tax deferrals and potential reductions on capital gains under the US tax code.

Glossary
Q

Qualified Purchaser

An investor category under US securities law that meets a higher financial threshold than an accredited investor. Generally, individuals or entities with at least $5 million in investable assets qualify. This status grants access to certain private investment opportunities not available to the general public.

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Q

Quarterly Distributions

Payments made to investors every three months from the property’s net rental income after deducting expenses and management fees.

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Q

Quiet Enjoyment (Lease Term)

A legal right ensuring that tenants can occupy and use their rented property without interference, provided they comply with the terms of the lease.

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Q

Quitclaim Deed

A type of deed used to transfer ownership interest in a property without guaranteeing that the title is free from defects. It is often used between family members or to clear up title issues, rather than for standard property sales.

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R

RESPA (Real Estate Settlement Procedures Act)

A US federal law requiring lenders and settlement agents to provide full disclosure of all closing costs and prohibiting kickbacks in real estate transactions. It ensures transparency and consumer protection during the closing process.

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R

Real Estate Investment Trust (REIT)

REITs are publicly traded companies that own and manage income-producing properties, distributing most profits as dividends. Investing in REITs gives you liquid exposure to real estate.

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R

Real Estate Transfer Tax

A state or local tax paid when property ownership is transferred from one party to another. Rates vary by location and are typically paid at closing as part of total acquisition costs.

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R

Recourse

The legal right of a lender or investor to claim the borrower’s personal assets if a loan or financial obligation is not repaid. In unleveraged real estate models like Wahed’s, investments are structured without debt and therefore have no recourse risk for investors.

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R

Regulation A (Reg A)

An SEC exemption that allows qualified companies to raise up to $75 million from the public each year with lighter disclosure requirements than a traditional IPO.

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R

Regulation CF (Reg Crowdfunding)

An SEC regulation that allows companies to raise up to $5 million annually from the public through approved crowdfunding portals. Investors are subject to limits based on income and net worth.

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R

Regulation D (Reg D)

An SEC framework that governs private placements to accredited investors. Reg D offerings do not require SEC qualification but are limited to specific investor types and fundraising caps.

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R

Rental Income

The money received from tenants occupying a property. In fractional real estate, net rental income (after expenses) is distributed to investors as quarterly or annual dividends.

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Rental Yield

Rental yield shows the income return on a property, calculated by dividing annual rent by the purchase price and expressing it as a percentage. It gives a quick snapshot of how much cash flow you can expect before expenses.

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R

Repairs

Routine fixes to keep a property in working order, such as replacing a faulty tap or repainting scuffed walls.

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R

Reserve Fund

Cash set aside from rental income for future costs, such as major repairs or short voids. Building reserves can smooth dividends.

Glossary
R

Return on Investment (ROI)

How much you actually earn on your investment overall. It’s shown as a percentage: ROI = total profit ÷ amount invested (where profit is net rent received plus any net gain at sale). Example: if you invest $1,000 and get $1,300 back in total → profit $300 → ROI 30%.

Glossary
R

Riba (Interest)

An Arabic word with literal meanings of “increase” or “excess” and is roughly translated as usury or interest. Any form of riba is strictly prohibited under Shariah (Islamic) law.

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R

Risk Disclosure

A statement explaining the potential risks associated with investing, such as market volatility, illiquidity, or changes in property value. Under SEC regulations, all investment platforms must provide a detailed risk disclosure before funds are accepted.

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S

SEC (Securities and Exchange Commission)

The government agency responsible for regulating securities markets and protecting investors. The SEC oversees Regulation A, Regulation D and other exemptions used in fractional real estate offerings.

Glossary
S

Schedule K-1

A tax form issued annually by Limited Liability Companies (LLCs) to report each investor’s share of income, deductions and credits. Fractional real estate investors use the Schedule K-1 to report their portion of income to the IRS.

Glossary
S

Secondary Market

A platform where investors can resell their shares in a property’s LLC after the initial offering. If there is no secondary market, investors usually hold shares until exit.

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S

Security Deposit

An amount paid by a tenant before moving into a property, held by the landlord or property manager as protection against damage or unpaid rent. The deposit is refundable if the tenant meets all lease conditions.

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S

Service Providers

Third-party firms or professionals involved in managing or supporting a property or investment. Examples include property managers, accountants, title companies, attorneys and maintenance vendors.

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S

Shariah Certificate

A document confirming that a product or structure complies with Shariah after review by qualified scholars.

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S

Shariah Compliant

An investment structured in accordance with Islamic law, following permitted principles and avoiding prohibited elements such as interest and gambling.

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S

Shariah Review Bureau (SRB)

A panel of qualified Islamic scholars that reviews and certifies investment offerings for compliance with Shariah principles. The SRB defines screening criteria, approves permissible structures and provides continuous oversight.

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S

Single-Family Property

A standalone residential home designed to house one family.

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S

Sublease

An arrangement where a tenant rents out part or all of their leased property to another party (the subtenant), while still retaining responsibility under the original lease agreement.

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S

Subscription Agreement

A legal document through which an investor agrees to purchase shares in a property LLC. It outlines investment amount, terms, representations and acknowledgment of risks.

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S

Sukuk (Islamic Bonds)

A Shariah-compliant investment instrument representing ownership in an underlying asset or project. Sukuk returns are generated from asset performance rather than interest payments.

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T

Takaful (Islamic insurance)

A cooperative form of insurance designed to comply with Shariah, where participants share risk and any surplus. Used conceptually as the ethical alternative to conventional insurance.

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T

Target Exit Date

The planned date to sell the property and distribute proceeds. Actual timing can vary with market and asset conditions.

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T

Tax-Deferred Exchange

Another term for a 1031 Exchange, which allows investors to sell one investment property and reinvest the proceeds into another similar property without immediately paying capital gains tax, provided IRS requirements are met.

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T

Tenancy

The legal right to occupy a property under a lease agreement.

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T

Tenancy in Common (TIC)

A form of joint property ownership where multiple parties hold shares that can be unequal and independently transferable.

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T

Tenant

A tenant is someone who rents and occupies a property under the terms of a lease or tenancy agreement. Tenants have rights to a safe, habitable home and must pay rent on time, while respecting any rules set out in their lease.

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T

Title

The legal record of ownership for a property. Title confirms who owns the asset and outlines any liens, easements or restrictions affecting it. It is verified during due diligence and officially transferred to the LLC at closing.

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T

Title Insurance

An insurance policy that protects the property owner and lender from potential losses due to defects or disputes in the property’s title.

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T

Total Return

How much you earn overall on your investment over the whole holding period. It adds up every rental distribution paid to you during the hold (for example, quarterly over five years) plus your share of the net gain at sale). Example: if you invest $1,000 and get $1,300 back in total → profit $300 → ROI 30%.

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T

Transfer Tax

A state or local tax charged when a property’s ownership is transferred.

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T

Trust Account

A separate account used by escrow agents, brokers or property managers to hold client or investor funds securely until disbursed. Trust accounts ensure segregation of funds in line with regulatory standards.

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T

Turnkey Property

A fully renovated, income-generating property that is ready for immediate rental or investment. Investors can begin earning rental income immediately after acquisition, with minimal management involvement required.

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U

US GAAP (Generally Accepted Accounting Principles)

The accounting framework used in the United States for preparing financial statements. Fractional real estate LLCs typically follow US GAAP standards when reporting income, expenses and investor returns.

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U

Underwriting (Property)

The process of evaluating a property’s financials, condition and market potential before approving it for investment. Underwriting includes reviewing rental income, expenses, comparable sales and tenant stability to ensure the deal meets performance and risk standards.

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U

Uniform Commercial Code (UCC)

A standardized set of laws governing commercial transactions in the US. In real estate, UCC filings may be used to record security interests in personal property or fixtures that are part of a larger transaction.

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U

Unit

In fractional real estate, a “unit” refers to the ownership share an investor holds in a property’s LLC.

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U

Unrealized Gain (or Loss)

The increase or decrease in a property’s market value before it has been sold. Gains or losses remain “unrealized” until the property is sold and the value change is finalized.

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U

Urban Development

The planning and improvement of city areas through construction, infrastructure and housing projects. Urban development influences long-term property appreciation and rental demand.

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V

Vacancy / Void Period

A void period is the time when a rental property is unoccupied and generating no income because tenants have moved out or before new tenants move in.

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V

Vacancy Rate

The percentage of total rental units in a property that are unoccupied during a specific period.

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V

Valuation

An independent assessment of a property’s fair market value, typically conducted by a licensed appraiser.

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