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.
A recession is a significant, widespread, and prolonged decline in economic activity, typically characterized by negative Gross Domestic Product (GDP) growth, rising unemployment, and reduced consumer spending, impacting real estate markets through decreased demand and property values.
A recession-resistant asset is an investment that tends to maintain or increase its value and generate stable income even during economic downturns, often due to providing essential goods or services.
The Recovery Phase is a stage in the real estate market cycle following a downturn, characterized by stabilizing prices, increasing transaction volumes, and a gradual return of investor confidence, signaling the beginning of an upward trend.
Regional Market Analysis is the process of evaluating economic, demographic, and real estate-specific factors within a defined geographic area to identify investment opportunities and assess risks.
A rent increase is when a landlord raises the amount of money a tenant pays for rent, typically at the end of a lease term. It's a common practice to keep up with rising costs and market values.
Rental supply refers to the total number of available residential or commercial properties for rent within a specific market at a given time, influencing rental rates and vacancy rates.
A rule of thumb in real estate investing is a simple, practical guideline used for quick, preliminary assessments of a property's potential, helping investors efficiently screen deals before conducting detailed analysis.
The scarcity mindset in real estate investing is a psychological bias where an investor perceives opportunities or resources as finite, leading to fear-driven decisions like rushing into deals or holding onto underperforming assets.
The secondary mortgage market is a financial marketplace where existing mortgage loans and mortgage-backed securities (MBS) are bought and sold by investors, providing liquidity to primary lenders and influencing interest rates.
A real estate market condition where low inventory and high buyer demand give sellers a significant advantage, leading to higher prices and faster sales.
Side hustle income refers to additional earnings generated outside of a primary job, strategically utilized by real estate investors to fund down payments, renovations, or build cash reserves, thereby accelerating their investment growth.
Speculative demand in real estate refers to the purchase of properties primarily driven by the expectation of future price appreciation, rather than for immediate use, rental income, or long-term intrinsic value.
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