Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.
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Foundation terms you need to know first (92 terms)
Development costs are all the expenses incurred during the process of acquiring land, designing, constructing, and preparing a real estate project for use or sale, from start to finish.
Equity investment in real estate involves directly owning a portion or all of a property, providing the investor with an ownership stake and the potential to benefit from appreciation and rental income.
Accrual basis accounting records revenues when they are earned and expenses when they are incurred, regardless of when cash actually changes hands. This method provides a more accurate picture of a business's financial performance over time.
Base rent is the fixed, minimum rent amount paid by a tenant to a landlord for the use of a property, excluding additional charges like operating expenses, taxes, or utilities.
An office building is a commercial property designed for businesses to conduct administrative, professional, or commercial operations, offering spaces for work and meetings.
Complex strategies and professional concepts (131 terms)
Slow BRRRR is an advanced real estate investment strategy that extends the traditional BRRRR (Buy, Rehab, Rent, Refinance, Repeat) cycle over a longer period, often several years, to maximize equity appreciation and mitigate market risks.
An Equity-for-Property Swap is an advanced real estate investment strategy where an investor exchanges equity in one or more properties or entities for direct ownership of another property, often to achieve tax deferral, portfolio restructuring, or strategic asset acquisition.
The accounting process of recognizing the estimated cost of an Asset Retirement Obligation (ARO) as a liability and capitalizing a corresponding asset, which is then depreciated over its useful life, reflecting the future costs associated with retiring a long-lived asset.
A Personal Financial Stress Test is a systematic evaluation of an individual's or household's financial resilience against adverse economic scenarios, crucial for real estate investors to safeguard their portfolios.
Equity dilution occurs when a company or investment vehicle issues new shares, decreasing the ownership percentage of existing shareholders. In real estate, this often happens in syndications or partnerships when additional capital is raised.
Commercial lease review is the meticulous examination of a commercial lease agreement by an investor or their legal counsel to understand all terms, conditions, financial obligations, and potential risks before acquisition or execution.
Commercial Real Estate (CRE) refers to properties used exclusively for business activities or to generate income, encompassing office, retail, industrial, and large multifamily assets.
Commercial Real Estate (CRE) Market Analysis is the systematic process of evaluating market conditions, trends, and factors to assess the viability and potential performance of a commercial property investment.
Commercial Real Estate (CRE) risk assessment is the systematic process of identifying, analyzing, and evaluating potential threats and uncertainties that could impact the financial performance and value of a commercial property investment.
A commission in real estate is a fee paid to a real estate agent or broker for facilitating a property transaction, typically calculated as a percentage of the sale price.
Common Area Maintenance (CAM) refers to the costs associated with operating and maintaining shared areas in a commercial property, which are typically passed through to tenants as part of their lease agreements.
Common size analysis is a financial statement analysis technique where each line item is expressed as a percentage of a base figure, enabling comparison across different-sized properties or over various periods.
Comparable Sales (Comps) are recently sold properties similar in characteristics to a subject property, used to estimate its fair market value.
A Comparative Market Analysis (CMA) is an informal estimate of a property's value based on recently sold, active, and expired listings in the same area, used by real estate professionals to help buyers and sellers determine a competitive price.
Compounding interest is the process where an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time, leading to exponential growth.
Comprehensive income represents the total change in a company's equity during a period from non-owner sources, encompassing both net income and other comprehensive income (OCI) items not reported on the traditional income statement.
Construction costs encompass all expenses incurred during the building or renovation of a real estate project, including materials, labor, permits, and professional fees. These costs are critical for determining project feasibility and profitability.
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