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.
The Equity Multiple is a performance metric that measures the total cash distributions received from an investment relative to the total equity invested, indicating how many times an investor's initial capital has been returned.
The Equity Multiplier is a financial leverage ratio that measures the proportion of a company's assets financed by shareholders' equity, indicating how much debt is used to finance assets and amplify returns.
An Equity Partnership is a real estate investment structure where multiple parties contribute capital for an ownership stake in a property or project, sharing in profits and risks through a defined distribution waterfall.
An Equity REIT (Real Estate Investment Trust) is a company that owns and operates income-producing real estate, allowing individual investors to invest in large-scale property portfolios without direct ownership or management.
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.
A legally binding document signed by a tenant that certifies the current status, terms, and conditions of their lease agreement, providing critical verification for real estate buyers and lenders.
The exchange ratio defines the number of shares or units of one asset that will be received in exchange for each share or unit of another asset, commonly used in real estate syndications, mergers, or portfolio swaps to determine relative value.
The exercise price, also known as the strike price, is the predetermined price at which an underlying asset, such as a property in a real estate option contract, can be bought or sold.
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.
Fair Value Accounting is an accounting principle that requires certain assets and liabilities to be recorded at their current market value, or 'fair value,' rather than their historical cost. This approach aims to provide more relevant and up-to-date financial information for real estate investors.
A comprehensive assessment of a proposed real estate project or investment to determine its viability, practicality, and potential for success across market, technical, financial, operational, and legal aspects.
A fee structure is the system of charges, costs, or payments associated with real estate services, transactions, or property management, outlining how much you pay, when, and on what basis.
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