Real Estate Jargon: 10 Terms You Must Know Before You Buy

Introduction:
The language of real estate can be intimidating. Between zoning lingo, legal terms, and investment metrics, even smart buyers can get lost. Here’s a breakdown of 10 essential terms that every NYC investor and developer must know.

1. Zoning Code:
Defines what type of building can be constructed — residential (R), commercial (C), manufacturing (M), or mixed-use. Each code (like R6B or C4-4) comes with its own height, density, and usage rules.

2. FAR (Floor Area Ratio):
A ratio that determines how much total floor space you can build. For example, a 10,000 sq. ft. lot with a 2.0 FAR = 20,000 sq. ft. of buildable space.

3. Setbacks:
Mandatory open space between the building and the lot edge. Setbacks affect the maximum usable footprint.

4. Lot Coverage:
The percentage of the total lot area that can be covered by the building at ground level.

5. Cap Rate (Capitalization Rate):
A formula used to evaluate return on investment: Net Operating Income ÷ Property Value.

6. Variance:
A legal exception to zoning rules granted by the city (e.g., building taller than normally allowed).

7. Easement:
A right for someone else to use part of your property — like utilities, sewer lines, or shared driveways.

8. Encumbrance:
A claim, lien, or legal liability on a property that could restrict its use.

9. Title Search:
A legal review of ownership records to ensure you’re buying a clean, uncontested property.

10. Air Rights:
The ability to build above your property — or buy unused development rights from adjacent lots.

Conclusion:
Knowledge is power. The more you understand real estate language, the better deals you can spot — and negotiate. Bookmark this glossary before your next lot meeting.