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.
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.
Overbuilding occurs when the supply of new real estate units in a market significantly exceeds the current and projected demand, leading to increased vacancies, downward pressure on rents and property values, and reduced investment returns.
A cognitive bias where an individual's subjective confidence in their judgments is reliably greater than the objective accuracy of those judgments, leading to underestimation of risks and overestimation of returns in real estate investing.
Panic selling occurs when investors rapidly sell off assets, often at a loss, due to fear, negative news, or market uncertainty, leading to sharp price declines and exacerbating market downturns.
The Peak Phase is the highest point in a real estate market cycle, characterized by maximum property values, strong demand, and robust economic activity, just before a market downturn or correction.
A critical metric that assesses the financial health of a pension plan by comparing its current assets to its projected future liabilities, indicating its ability to meet long-term obligations.
Population growth is the increase in the number of people in a specific area, a key indicator for real estate demand, property values, and rental income potential.
The Present Value Factor (PVF) is a decimal figure used to discount a future cash flow to its current worth, based on a specific discount rate and period, essential for time value of money calculations.
The Prime Rate is the interest rate that commercial banks charge their most creditworthy corporate customers, serving as a benchmark for many variable-rate loans and heavily influenced by the Federal Funds Rate.
Property taxes are recurring taxes levied by local governments on real estate, based on its assessed value, to fund public services and infrastructure.
A Public-Private Partnership (PPP) is a long-term contract between a public entity and a private company for the provision of public assets or services, leveraging private sector expertise and capital to deliver infrastructure and services traditionally provided by the government.
Purchasing power refers to the amount of goods and services a unit of currency can buy, directly impacting an investor's ability to acquire real estate assets and the real value of their returns.
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Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.