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.
Real estate refinancing is the process of replacing an existing mortgage loan with a new one, typically to secure better terms, lower payments, or access property equity for investment purposes.
Real estate software comprises specialized digital tools and applications designed to help investors, agents, and property managers streamline operations, analyze deals, and manage properties more efficiently.
Real estate syndication is a private equity strategy where multiple investors pool capital to acquire and manage large-scale real estate assets, typically led by a sponsor (General Partner) for passive Limited Partners.
Real estate tax deductions are IRS-approved expenses that investors can subtract from their gross rental income, reducing taxable income and overall tax liability.
The Real Estate Value Chain describes the sequential stages involved in creating, enhancing, and realizing value from real estate assets, spanning from initial concept to final disposition.
Real estate wholesaling is an investment strategy where an investor contracts a property from a motivated seller and then assigns that contract to an end buyer for a fee, without ever taking ownership of the property.
Real Options Analysis (ROA) is an advanced valuation methodology that applies financial option pricing theory to real assets and investment opportunities, quantifying the value of managerial flexibility to adapt to future uncertainties.
Real return measures the actual purchasing power gain of an investment after accounting for inflation, providing a more accurate assessment of an investor's wealth growth.
Real wages represent the actual purchasing power of an individual's earnings, adjusted for inflation, providing a clearer picture of economic well-being and its impact on real estate affordability.
A realized gain or loss occurs when an asset, like a real estate property, is sold for a price different from its original cost, resulting in a profit or deficit that has been "locked in" by a completed transaction.
The recapture tax rate is the specific tax rate, typically up to 25%, applied to the portion of a real estate investment's gain that is attributable to previously deducted depreciation when the property is sold.
Receivables management in real estate is the strategic process of optimizing rent collection, minimizing delinquencies, and managing tenant accounts to maximize cash flow and protect asset value.
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