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.
Discontinued operations represent a component of an entity that either has been disposed of or is classified as held for sale, and represents a strategic shift that will have a major effect on an entity's operations and financial results.
Discount points are an upfront fee paid to a lender at closing in exchange for a lower interest rate on a mortgage loan, effectively pre-paying some of the interest.
Discounted Cash Flow (DCF) is a valuation method that estimates the intrinsic value of an investment by projecting its future cash flows and discounting them back to their present value.
Discounted Cash Flow (DCF) is an advanced valuation method that estimates an investment's value by projecting its future cash flows and discounting them back to their present value using a specific rate, accounting for the time value of money.
Disintermediation is the process of removing intermediaries from a transaction or supply chain, allowing direct interaction between parties. In real estate, this often means investors and borrowers or sellers engaging directly, bypassing traditional financial institutions, brokers, or other middlemen.
A disposal group, under IFRS 5, represents a group of assets to be disposed of, by sale or otherwise, together with any directly associated liabilities. It is classified as held for sale or held for distribution to owners if specific criteria are met, impacting its measurement and presentation in financial statements.
Distressed asset investing involves acquiring properties or debt instruments from sellers facing financial hardship, often at a significant discount, with the goal of rehabilitation, repositioning, or restructuring for profit.
A distressed property is real estate facing financial, physical, or legal challenges, often sold below market value due to owner pressure or lender action, offering potential for investor profit.
In real estate investing, distribution refers to the payout of profits or cash flow from an investment property or fund to its investors. These payouts can occur regularly, such as monthly or quarterly, or as a lump sum upon sale or refinancing.
A distribution policy in real estate investing outlines how profits, cash flow, and capital are allocated and disbursed among investors and sponsors in a syndicated deal or fund.
Distribution Yield measures the cash income an investor receives from an investment, typically expressed as a percentage of its current market price. It's commonly used for income-generating assets like REITs and private real estate syndications.
Dividend recapitalization is a corporate finance transaction where a company issues new debt to pay a large dividend to its shareholders, often used by private equity firms to extract value from an investment before a full exit.
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