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.
Investment fraud refers to deceptive practices that induce investors to make purchases or sales based on false information, often resulting in significant financial losses. It encompasses a broad range of illicit schemes designed to exploit investor trust and capital.
Investment goal derailment occurs when an investor's real estate objectives are not met or are significantly delayed due to unexpected events or poor planning, leading to underperformance or losses.
The disciplined approach of allowing real estate investments sufficient time to mature and realize their full potential, often involving riding out short-term market fluctuations for long-term gains.
Irrational exuberance describes a period of unsustainable investor overconfidence and speculative buying that drives asset prices, such as real estate, far above their fundamental value, often leading to a market bubble and subsequent correction.
Job growth refers to the increase in employed individuals within a geographic area, serving as a key economic indicator for real estate investors to gauge market health, demand for properties, and potential for appreciation and rental income.
Job growth by metro refers to the rate at which new employment opportunities are created within a specific metropolitan area, serving as a critical indicator for real estate investors to assess market health and future property demand.
Job market analysis is the process of evaluating employment trends and economic health in a specific area to forecast its impact on real estate demand, property values, and rental income for investors.
Liability-Driven Investment (LDI) is an investment strategy primarily used by institutional investors, such as pension funds and insurance companies, to align their asset portfolios with their future liabilities. The core objective is to ensure sufficient assets are available to meet future obligations, typically by minimizing the sensitivity of the funding ratio to market fluctuations, especially interest rate changes.
Liquidity in real estate refers to the ease and speed with which a property can be converted into cash at its fair market value. Real estate is typically considered an illiquid asset due to the time and costs involved in selling.
A loan modification is a permanent adjustment to the terms of an existing mortgage or loan, typically made by the lender to help a borrower facing financial hardship avoid default and foreclosure.
Long-term capital refers to funds committed to an investment for an extended period, typically several years or more, essential for real estate projects requiring significant upfront investment and delayed returns.
Loss aversion is a cognitive bias where the psychological impact of a loss is felt more intensely than the pleasure of an equivalent gain, often leading to irrational investment decisions.
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