Life, health, disability, property insurance, risk assessment, and coverage strategies.
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Foundation terms you need to know first (8 terms)
Loss of income in real estate refers to a situation where an investor's expected rental revenue from a property is reduced or eliminated, often due to vacancies, tenant issues, or property damage.
Risk transfer is a strategy in real estate investing where the potential financial burden of a risk is shifted from the investor to another party, often through insurance policies or contractual agreements, to protect assets and limit liability.
Water damage refers to any destructive impact on a property caused by unwanted water, ranging from minor leaks to major flooding, leading to structural issues, mold, and significant repair costs for real estate investors.
Property insurance provides financial protection against physical damage to real estate assets and liability for injuries on the property, crucial for safeguarding real estate investments.
A readily accessible pool of money set aside to cover unexpected financial challenges, crucial for both personal and real estate investment stability.
Actual Cash Value (ACV) is an insurance term referring to the cost to replace or repair damaged property, minus depreciation for age, wear, and tear. It represents the current value of an item at the time of loss.
Behavioral risk management in real estate involves identifying and mitigating the impact of psychological biases and irrational decision-making on investment outcomes, ensuring more disciplined and objective choices.
Calculated risk is an investment strategy where potential financial or strategic actions are taken after thoroughly assessing, quantifying, and developing mitigation strategies for all associated risks. It's an informed decision based on data and analysis, not a gamble.
Capital preservation is an investment objective focused on safeguarding the initial investment principal from loss, prioritizing risk minimization and stability over aggressive growth. It's a strategy to protect wealth, especially in volatile markets or for risk-averse investors.
Commercial General Liability (CGL) insurance protects real estate investors from financial losses due to third-party claims of bodily injury, property damage, and personal or advertising injury occurring on their commercial properties. It covers legal defense costs and damages up to policy limits.
A contingency plan in real estate investing is a proactive strategy to prepare for unexpected events or challenges that could negatively impact an investment, ensuring business continuity and financial protection.
Contingency planning in real estate involves identifying potential risks and unexpected events, then developing proactive strategies and setting aside resources to mitigate their financial and operational impact on an investment.
Default risk is the potential for a borrower or tenant to fail to meet their contractual financial obligations, such as making mortgage or rent payments, leading to financial losses for lenders and property owners.
Disability insurance provides income replacement if you become unable to work due to illness or injury, protecting both active and essential passive income for real estate investors and safeguarding their portfolios.
A readily accessible pool of money set aside to cover unexpected financial challenges, crucial for both personal and real estate investment stability.
Homeowner's insurance is a comprehensive property insurance policy that protects a homeowner's dwelling, personal belongings, and liability against various perils like fire, theft, and natural disasters.
Lender risk assessment is the process financial institutions use to evaluate the potential for loss when extending credit for real estate investments, considering borrower, property, and market factors to determine loan approval and terms.
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