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.
Property disposition is the strategic process of selling, transferring, or otherwise divesting an investment property. It involves evaluating market conditions, financial implications, and tax strategies to maximize returns and achieve specific investment goals.
Property maintenance involves the ongoing care, repair, and upkeep of real estate assets to preserve their value, functionality, and safety, ensuring long-term profitability and tenant satisfaction for investors.
A property management fee is the cost paid to a professional property manager for overseeing and handling the daily operations of a rental property, directly impacting an investor's cash flow and profitability.
Property management fees are charges paid to a professional company for managing the daily operations of a rental property, covering services like tenant screening, rent collection, and maintenance, directly impacting an investor's profitability.
A Property Operating Account is a dedicated bank account used exclusively for managing all income and expenses associated with an investment property. It ensures financial separation, simplifies record-keeping, and provides a clear overview of the property's financial performance.
Property recording is the official process of filing legal documents related to real estate transactions with a government office, creating a public record of ownership, liens, and other interests to establish legal priority and provide public notice.
Property tax is a recurring tax levied by local governments on real estate, calculated based on the property's assessed value, and used to fund public services. It is a significant ongoing expense for property owners and investors.
Property tax assessment is the process by which local government appraisers determine the taxable value of real estate, serving as the basis for calculating annual property taxes.
Property underwriting is the comprehensive process of evaluating the risks and potential returns of a real estate investment to determine its suitability for acquisition or financing, involving detailed financial, market, and property-specific analysis.
Property valuation methods are systematic approaches used to estimate the fair market value of real estate, crucial for investment, financing, and taxation decisions. They include the Sales Comparison, Income Capitalization, and Cost Approaches.
Property value is the estimated monetary worth of a real estate asset, determined by various factors including market conditions, location, and physical characteristics. It is a critical metric for investment analysis, financing, and taxation.
Property vetting is the systematic process of thoroughly researching and evaluating a potential real estate investment to assess its risks, potential returns, and overall suitability before making a purchase decision.
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