Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.
Master financial analysis & metrics with our progressive approach
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.
Machine Learning (ML) is a branch of Artificial Intelligence that allows computer systems to learn from data, identify patterns, and make predictions or decisions without explicit programming, revolutionizing data analysis in real estate investing.
Maintenance costs are the ongoing expenses required to keep a real estate property in good repair, functional, and habitable, directly impacting an investor's profitability and cash flow.
Market capitalization, or market cap, is the total value of a company's outstanding shares, calculated by multiplying the current share price by the number of shares issued. It represents the market's perception of a company's total worth.
Market liquidity in real estate refers to the ease with which a property can be converted into cash without significantly impacting its price. It's a critical factor for investors assessing the flexibility and risk of their real estate holdings.
Market value in real estate is the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller acting prudently, knowledgeably, and typically uninfluenced by undue stimulus.
The Maximum Allowable Offer (MAO) is the highest price a real estate investor can pay for a property while still achieving their target profit after all projected costs.
The maximum purchase price is the highest amount an investor can pay for a property while still meeting their desired financial objectives and investment criteria, considering all costs and financing.
Member Acquisition Cost (MAC) is a key metric in real estate investment platforms and syndications, representing the total cost incurred to acquire a new investor or member. It encompasses all marketing, sales, and operational expenses directly attributable to bringing a new investor into a fund or platform.
A crucial metric measuring the percentage of existing members or tenants that an organization or property successfully retains over a specific period, directly impacting long-term profitability and operational efficiency in real estate.
A mill rate is a property tax rate expressed as the amount of tax per $1,000 of a property's assessed value, used by local governments to fund public services.
Modern Portfolio Theory (MPT) is an investment framework that aims to maximize portfolio expected return for a given level of market risk, or equivalently, minimize risk for a given level of expected return, through diversification.
The Modified Accelerated Cost Recovery System (MACRS) is the current tax depreciation system used in the United States for most tangible depreciable property, allowing businesses and real estate investors to recover the cost of assets over a specified period.
Explore complementary areas that build on financial analysis & metrics concepts
Personal budgeting, expense tracking, cash flow management, emergency funds, and savings strategies.
Credit scores, debt consolidation, loan management, credit repair, and debt payoff strategies.
Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
Wills, trusts, estate taxes, succession planning, beneficiary planning, and wealth preservation.