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.
Emerging markets in real estate refer to regions or countries undergoing rapid economic growth and industrialization, offering high potential returns but also increased risks for investors.
Emotional investing is the practice of making real estate decisions based on feelings, impulses, or psychological biases rather than rational analysis and objective data, often leading to suboptimal financial outcomes.
An endogenous variable is a factor whose value is determined within the model or system being analyzed, influenced by other variables and relationships within that system, making it crucial for dynamic real estate investment analysis.
An exogenous variable is a factor originating outside a real estate investment model or system that significantly influences its outcomes but is not explained or determined by the model itself. These external forces are critical for advanced risk assessment and strategic planning.
The Expansion Phase is a period within the real estate market cycle marked by sustained economic growth, increasing demand, rising property values, and robust construction activity.
FICA Tax, or Federal Insurance Contributions Act Tax, is a U.S. federal payroll tax that funds Social Security and Medicare programs. It is paid by both employees and employers, and by self-employed individuals as self-employment tax.
The FOMC Dot Plot is a visual representation of individual Federal Open Market Committee members' projections for the future path of the federal funds rate, offering insights into the Federal Reserve's monetary policy outlook.
A factor market in real estate refers to the market where the inputs or resources required for real estate development and operations are bought and sold, including land, labor, capital, and entrepreneurship.
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.
Farmland investment involves buying agricultural land with the goal of generating income through farming operations, leasing to farmers, or benefiting from land value appreciation. It's considered a stable asset class, often acting as a hedge against inflation.
Fear of Missing Out (FOMO) in real estate investing is the anxiety that a profitable investment opportunity will be missed, leading to impulsive, emotionally-driven decisions rather than rational, data-backed analysis.
The Federal Funds Rate is the target interest rate for overnight lending between commercial banks, influenced by the Federal Reserve to manage inflation and employment, and serving as a benchmark for other interest rates, including mortgages.
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