Phase I Environmental Report
A comprehensive report required by most Lenders and produced by an independent company that details the current environmental condition of a property. Typically requires a historical review of the property’s previous uses and may require an operations and maintenance (O&M) plan for the future removal of asbestos and other harmful items.

Physical Condition Report
A comprehensive report required by most Lenders and produced by an independent company that details the current physical condition of a property. Typically includes specific items that require immediate repair as well as those items that should be replaced over the life of the loan. Basis used to establish the annual Replacement Reserve Escrow for the property.

Potential Gross Income
The amount of income that could potentially be produced by a real estate property assuming there are no vacancies or collection losses. Does not include miscellaneous or other income.

Prime Rate
The lowest commercial interest rate charged by banks on short-term loans to their most credit-worthy customers. The prime rate is not the same as the long-term mortgage rate, though it may influence long-term rates. Mortgage rates are generally higher than the prime rate, but exceptions occur at times.

Pro-forma
A financial or accounting statement using estimates and assumptions to project income and the performance of real property over a period of time.

Principal & Interest Payments [P&I]
A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to amortization of the principal balance. Commonly used with amortizing loans.