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.
Physical deterioration refers to the loss in value of a property due to wear and tear, decay, or structural damage over time. It is a form of depreciation that directly impacts a property's market value and investment returns.
Portfolio growth in real estate investing refers to the strategic increase in the value, cash flow, or number of properties within an investor's real estate holdings over time, typically achieved through reinvestment, value-add strategies, and market appreciation.
Portfolio longevity refers to the ability of a real estate investment portfolio to remain profitable and sustainable over an extended period, often decades, through various market conditions.
Portfolio rebalancing is the process of adjusting an investment portfolio's asset allocation back to its original or target levels, typically to maintain a desired risk profile and investment strategy.
Portfolio turnover measures the rate at which assets within an investment portfolio are bought and sold over a specific period, typically one year, indicating the frequency of trading activity.
Predictive analytics in real estate utilizes historical data, statistical models, and machine learning to forecast future market trends, property values, and investment outcomes, enabling proactive decision-making for investors.
Preferred Return is a priority distribution threshold in real estate syndications, ensuring limited partners receive a specified annual return on their unreturned capital before general partners share in profits.
Preferred stock is a hybrid security that combines features of both bonds and common stock, typically offering fixed dividend payments and priority over common stockholders in receiving dividends and assets upon liquidation.
Premature death in real estate investing refers to an investor's unexpected passing before their financial and estate plans are fully established, leading to potential financial, operational, and legal challenges for their real estate portfolio and heirs.
A prepayment penalty is a fee charged by a lender if a borrower pays off a loan earlier than scheduled, compensating the lender for lost future interest income.
Present Value (PV) is the current worth of a future sum of money or stream of cash flows, discounted at a specific rate of return. It helps investors understand how much future money is worth today.
The Present Value Factor (PVF) is a decimal figure used to discount a future cash flow to its current worth, based on a specific discount rate and period, essential for time value of money calculations.
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