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.
Correlation measures the statistical relationship between two or more variables, indicating how they move in relation to each other. In real estate, it helps investors understand market dynamics and manage portfolio risk.
Cost accounting is a managerial accounting process that tracks, analyzes, and reports the costs associated with real estate projects or properties, providing crucial insights for budgeting, pricing, and profitability analysis.
Cost accumulation is the systematic process of identifying, tracking, and categorizing all expenses associated with a real estate investment project to determine its total actual cost.
Cost allocation is the process of identifying, accumulating, and assigning costs to specific cost objects, such as properties, projects, or departments, to accurately measure profitability and inform financial decisions.
A real estate valuation method that estimates a property's value by summing the cost to replace or reproduce its improvements, subtracting accrued depreciation, and adding the value of the land.
Cost control is the strategic process of planning, monitoring, and managing expenses to optimize profitability and achieve financial objectives in real estate investments.
Cost estimation in real estate is the process of forecasting the expenses required to acquire, develop, renovate, or operate a property, crucial for financial planning and investment analysis.
A cost overrun occurs when the actual cost of a real estate project exceeds its initial budget. It represents an unexpected increase in expenses that can significantly impact profitability and project timelines.
Cost overruns are unexpected or additional expenses incurred during a real estate project that exceed the initial budget, significantly impacting profitability and project timelines.
Cost Segregation is an IRS-approved tax strategy that reclassifies components of a commercial or residential rental property into shorter depreciation schedules, accelerating tax deductions and boosting immediate cash flow for real estate investors.
The Cost of Capital is the blended rate of return a real estate investment must generate to cover the costs of its financing, encompassing both debt and equity capital.
Cost of Sales (COS) in real estate refers to the direct expenses incurred in acquiring, holding, and ultimately selling an investment property, crucial for calculating net profit.
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