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.
In real estate, retention refers to the strategic act of keeping or holding onto assets, capital, or tenants over time, crucial for long-term wealth building and maximizing investment returns.
Return on Assets (ROA) is a financial ratio that indicates how profitable a company or investment property is in relation to its total assets. It measures management's efficiency in using assets to generate earnings, irrespective of financing structure.
Return on Cost (ROC) is a real estate metric that measures the projected Net Operating Income (NOI) of a stabilized property against its total development or value-add cost, providing a forward-looking assessment of profitability for new projects.
Return on Equity (ROE) is a financial metric that measures the profitability of a real estate investment in relation to the equity invested, indicating how efficiently an investor is using their capital to generate profits.
Return on Investment (ROI) is a financial metric that measures the profitability of an investment by comparing the net profit to the initial cost, expressed as a percentage.
Return on Net Worth (RONW) is a financial metric that measures how efficiently a real estate investor's net worth is generating profit, calculated by dividing net income by average net worth.
Revaluation surplus is an equity account on a company's balance sheet, representing the unrealized gain arising from the revaluation of an asset, typically property, plant, and equipment, to its fair value, exceeding its historical cost or previous revalued amount.
Revenue Management in coworking spaces is a sophisticated strategy that applies dynamic pricing, demand forecasting, and inventory optimization techniques to maximize profitability and asset utilization within flexible workspace environments.
Revenue Per Available Room (RevPAR) is a key performance indicator (KPI) in the hotel industry that measures a hotel's ability to fill its available rooms and generate revenue from them, calculated by multiplying average daily rate by occupancy rate.
Revenue Per Square Foot (RPSF) is a financial metric used in real estate to measure the income generated by a property relative to its total usable square footage, providing insight into its operational efficiency and value.
Revenue Per Square Foot (RPSF) for coworking measures the total revenue generated by a coworking space divided by its total usable square footage, providing a key metric for operational efficiency and profitability analysis in flexible workspaces.
Revenue recognition is an accounting principle that dictates when and how revenue should be recorded in financial statements, ensuring it is recognized when earned, not necessarily when cash is received.
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