Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
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Foundation terms you need to know first (42 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 (43 terms)
Tax-exempt debt refers to bonds or other debt instruments issued by governmental entities or qualified private entities, where the interest earned by the bondholder is exempt from federal, and often state and local, income taxes.
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.
Infrastructure spending refers to government investment in public physical assets like transportation networks, utilities, and public facilities, which significantly influences real estate development, property values, and investment opportunities.
An Initial Public Offering (IPO) is the process by which a private company first offers its shares to the public, allowing individual and institutional investors to purchase ownership stakes. This transition from private to public ownership enables companies to raise significant capital for growth and expansion.
An institutional investor is a large organization, such as a pension fund, mutual fund, insurance company, or endowment, that pools money to invest in various assets, including real estate.
Interest is the cost of borrowing money, typically expressed as a percentage of the principal, or the return earned on invested capital. It is a critical factor in real estate financing, directly influencing loan payments, cash flow, and investment profitability.
An interest rate is the percentage charged by a lender for the use of borrowed money, typically expressed as an annual percentage of the principal amount.
The interest rate environment describes the prevailing level and trend of interest rates in an economy, significantly influencing borrowing costs, investment returns, and the overall real estate market dynamics.
Interest rate hikes refer to an increase in the benchmark interest rate set by a central bank, typically the Federal Reserve in the U.S., which influences borrowing costs across the economy, including mortgages and investment loans.
Interest rate risk is the potential for investment losses or reduced returns due to adverse changes in market interest rates, significantly impacting real estate valuations, financing costs, and cash flow projections.
An interest rate swap is a derivative contract where two parties agree to exchange future interest payments based on a specified notional principal amount, typically exchanging a fixed-rate payment for a floating-rate payment.
The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal over a specific period, significantly impacting real estate investment profitability and financing decisions.
Real estate inventory refers to the total number of properties currently available for sale in a specific market at a given time, serving as a key indicator of market supply.
The investment climate refers to the sum of economic, political, social, and regulatory factors that influence the attractiveness and risk of investing in a particular market or asset class.
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