The Investor's Roadmap: Using 10 Key Terms to Navigate the PRIME Framework

I'm Martin Maxwell, and this is part two of our language series. Last episode we covered the five terms every investor must know. Today we're mapping 10 terms to the five PRIME phases — Prepare, Research, Invest, Manage, Expand. Master these and you can read any deal, any market, any offer.

Prepare Phase: Credit Score and DTI

Before you look at a single property, lenders look at you. Credit score — 620 is the floor for most investment loans, 740+ gets you the best rates. DTI (debt-to-income) — your monthly debt payments divided by your gross income. Lenders typically want 43% or below. A $6,000 monthly income with $2,200 in debt payments? That's a 36.7% DTI. You're in the green.

These numbers determine what you can borrow. Get them right before you shop. Fix your credit, pay down debt, or increase income — and do it before you fall in love with a listing. A 720 credit score with a 38% DTI opens doors. A 650 with 45% DTI closes them.

Research Phase: Cap Rate and Cash-on-Cash Return

You've got 100 listings. How do you filter? [Cap rate](/glossary/cap-rate) and [cash-on-cash return](/glossary/cash-on-cash-return). Cap rate tells you what the property earns relative to its price. Cash-on-cash tells you what you earn on the money you put in. A 6% cap in a 5% cap market might mean value-add. A 4% cap in an 8% cap market might mean overpaying. Know your market's range — Memphis, Phoenix, Cleveland all run different numbers.

The investors who move fastest filter by these two metrics first. Cap rate weeds out overpriced. Cash-on-cash weeds out deals that don't cash flow for you.

Invest Phase: LTV, DSCR, ARV

You've found a deal. Now the financing. [LTV](/glossary/ltv) — loan-to-value. How much the bank will lend as a percentage of the purchase or ARV. 75% LTV on a $150,000 purchase means $112,500 from the bank, $37,500 from you. [DSCR](/glossary/dscr) — debt service coverage. Lenders want 1.25. Your NOI has to cover the mortgage by 25%. [ARV](/glossary/arv) — after-repair value. For BRRRR and flips, this is the number that makes or breaks the refi. Get the appraisal right.

One mistake I see: investors assume ARV based on Zillow or a guess. Get a real appraisal or a broker price opinion from someone who knows the comps. A $20,000 ARV mistake on a BRRRR can kill your entire refi plan. And when you're refinancing, lenders use the lower of purchase price plus improvements or ARV — so your ARV has to be defensible.

Why This Matters

Each phase has a language. You don't need to know every term in the glossary. You need to know the terms for the phase you're in. Stuck in Prepare? Credit score and DTI. Stuck in Research? Cap rate and cash-on-cash. Stuck in Invest? LTV, DSCR, ARV. The terms are the guide. Learn them in order, and you'll never waste time on deals that don't fit your stage.

Manage Phase: NOI and Vacancy Rate

You own it. Now you run it. [NOI](/glossary/noi) — net operating income. The property's earnings before debt. Track it monthly. If it drops, you've got a problem. Vacancy rate — the percentage of time units sit empty. 5% is healthy. 15% means you're bleeding. A $1,200 rent with 10% vacancy costs you $1,440 a year. That's real money. And it compounds: high vacancy often means longer turnover, more turnover costs, and a hit to your NOI that lenders notice when you try to refi or sell.

The investors who scale don't ignore these numbers. They watch them. A vacancy spike tells you something about marketing, pricing, or the property. Fix it before it compounds.

Expand Phase: Equity and 1031 Exchange

You've built wealth. Now you scale. Equity — the difference between what you owe and what the property's worth. $200,000 value, $120,000 loan? You've got $80,000 in equity. That's down payment money for the next deal. 1031 exchange — sell one property, buy another, defer the capital gains. The IRS gives you 45 days to identify a replacement and 180 days to close. It's one of the most powerful tools for scaling a portfolio.

Ten terms. Five phases. That's the play. Hit reiprime.com/glossary for the full definitions — and start speaking the language.

The investors who move fastest through PRIME learn the right terms for the phase they're in, apply them to real deals, then move on. You don't need 120 terms. You need 10 — and you need to use them. Bookmark reiprime.com/glossary. Come back when you hit a new phase. You've got this.