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.
The median home price is the middle value of all homes sold in a specific area during a given period, with half of sales occurring above and half below this price. It provides a reliable indicator of typical home values and market health for real estate investors.
Monetary policy refers to actions taken by a central bank, like the Federal Reserve, to manage the money supply and credit conditions, influencing interest rates, inflation, and ultimately, the real estate market.
Mortgage interest is the cost charged by a lender for borrowing money to purchase a property, calculated as a percentage of the outstanding loan principal. It's a critical component of monthly mortgage payments and a significant factor in real estate investment profitability.
Mortgage REITs (mREITs) are companies that invest in mortgages and mortgage-backed securities (MBS), generating income primarily from the interest earned on these investments and the spread between borrowing and lending rates.
A mortgage rate is the interest percentage charged by a lender on a home loan, directly determining the cost of borrowing and influencing monthly payments and total repayment amount.
A mortgage rate lock is a lender's guarantee to hold a specific interest rate for a set period, protecting borrowers from rising rates during the loan application and closing process.
The mortgage rate lock-in effect occurs when homeowners with low-interest rate mortgages are reluctant to sell their properties or refinance, due to significantly higher prevailing interest rates for new loans.
Mortgage rates are the interest percentages charged on real estate loans, determining the cost of borrowing and significantly impacting monthly payments and investment profitability.
Mortgage-Backed Securities (MBS) are investment vehicles representing claims on the cash flows from a pool of mortgage loans, allowing investors to indirectly participate in the mortgage market.
New Housing Starts refers to the number of new residential construction projects on which ground has been broken during a given period, serving as a key economic indicator for the health of the housing market and broader economy.
The value of the next best alternative that was not taken when a decision was made, representing the potential benefits missed from choosing one investment option over another in real estate.
The tax rate applied to most types of income, including wages, business profits, and short-term capital gains, which is typically higher than long-term capital gains tax rates for real estate investors.
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