Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
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Foundation terms you need to know first (39 terms)
The marginal tax rate is the tax rate applied to your very last dollar of taxable income. It's crucial for real estate investors to understand how additional income or deductions will impact their tax bill.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Building investor confidence is the process of developing a strong belief in one's ability to make sound real estate investment decisions, manage risks, and achieve financial goals through continuous learning and practical experience.
Housing supply and demand refers to the fundamental economic principle that explains how the availability of homes (supply) and the desire for homes (demand) interact to determine housing prices and market conditions.
The fundamental resources—land, labor, capital, and entrepreneurship—used to produce goods and services, including real estate, and are crucial for understanding economic activity and investment potential.
Complex strategies and professional concepts (39 terms)
A market phenomenon where a declining real estate market appears to reverse and begin an upward trend, only to quickly resume its downward trajectory, trapping investors who bought into the false recovery. It often leads to significant losses for those who misinterpret the temporary rebound as a true market bottom.
The Case-Shiller Home Price Index is a leading measure of U.S. residential real estate values, tracking changes in home prices across 20 major metropolitan areas and nationally using a repeat-sales methodology.
The Accounts Payable Turnover Ratio measures how quickly a company pays off its suppliers and short-term debts, indicating the efficiency of its working capital management and liquidity.
Other Comprehensive Income (OCI) represents revenues, expenses, gains, and losses that are excluded from net income but are recognized in comprehensive income, reflecting changes in equity from non-owner sources. It captures certain unrealized gains and losses that bypass the income statement.
Demand elasticity measures the responsiveness of the quantity demanded of a good or service to a change in its price or other influencing factors, crucial for real estate market analysis and investment strategy.
The 10-Year U.S. Treasury Note is a government debt security with a 10-year maturity, whose yield serves as a critical benchmark for long-term interest rates, including mortgage rates, and reflects broader economic expectations.
An Abundance Mindset in real estate investing is a psychological framework where an investor believes there are always enough resources, opportunities, and success for everyone, fostering collaboration and value creation.
The Accounts Payable Turnover Ratio measures how quickly a company pays off its suppliers and short-term debts, indicating the efficiency of its working capital management and liquidity.
Accumulated Other Comprehensive Income (AOCI) is an equity account on the balance sheet that records unrealized gains and losses from certain financial activities not yet recognized in net income, reflecting changes in equity from non-owner sources.
The Affordability Index measures whether a typical family earns enough income to qualify for a mortgage loan on a median-priced home. An index value of 100 means the median family income is exactly enough to qualify, while values above 100 indicate greater affordability.
Alternative investments are financial assets outside of traditional stocks, bonds, and cash, including real estate, private equity, and commodities, often used for diversification and higher return potential.
Alternative lending encompasses non-traditional financing sources like hard money, private lenders, crowdfunding, and seller financing, offering speed and flexibility for real estate investments, often prioritizing asset value over borrower credit.
Analysis paralysis is the state where a real estate investor over-analyzes a potential deal, leading to inaction and missed opportunities due to excessive research and fear of making a mistake.
An asset bubble occurs when the price of an asset, such as real estate, rises rapidly and significantly above its intrinsic value, driven by speculative demand rather than fundamental economic factors, eventually leading to a sharp price decline.
Asset correlation is a statistical measure quantifying how two assets' returns move in relation to each other, ranging from -1 (perfect negative) to +1 (perfect positive), crucial for real estate portfolio diversification and risk management.
The Average Propensity to Consume (APC) is an economic metric that measures the proportion of total disposable income that households spend on consumption rather than saving. It indicates consumer spending habits and overall economic health.
Bankruptcy is a legal process allowing individuals and businesses to discharge or repay debts under court supervision, significantly impacting real estate assets and future investment capabilities.
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Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.