Life, health, disability, property insurance, risk assessment, and coverage strategies.
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Foundation terms you need to know first (15 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.
Downside protection in real estate investing refers to strategies and measures taken to minimize potential financial losses or negative outcomes in an investment, safeguarding capital against adverse events.
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.
Vacancy risk is the potential for a rental property to remain unoccupied for a period, leading to a loss of rental income and increased holding costs for the investor. It's a key factor in real estate investment analysis.
Complex strategies and professional concepts (4 terms)
Indexed Universal Life (IUL) is a type of permanent life insurance that offers a death benefit and a cash value component, where the cash value growth is linked to the performance of a market index, such as the S&P 500, typically with a floor and a cap on returns.
Counterparty risk is the risk that a party to a contractual agreement will fail to fulfill its obligations, potentially leading to financial loss for the other party. In real estate, this can arise from various stakeholders, including lenders, borrowers, tenants, or joint venture partners.
The Infinite Banking Concept (IBC) is a financial strategy where individuals or businesses use a specially designed participating whole life insurance policy to become their own bank, financing major purchases and investments, including real estate, with policy loans.
Environmental insurance provides coverage for liabilities and costs associated with pollution incidents, contamination, and environmental damage, crucial for real estate investors managing properties with potential environmental risks.
Decreasing term life insurance is a type of term life insurance where the death benefit decreases over the policy's term, typically aligning with a declining debt such as a mortgage, while premiums usually remain level.
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.
A defensive play in real estate investing involves strategies focused on capital preservation and risk mitigation, particularly during uncertain economic conditions or market downturns, prioritizing stability over aggressive growth.
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.
Downside protection in real estate investing refers to strategies and measures taken to minimize potential financial losses or negative outcomes in an investment, safeguarding capital against adverse events.
A readily accessible pool of money set aside to cover unexpected financial challenges, crucial for both personal and real estate investment stability.
Environmental insurance provides coverage for liabilities and costs associated with pollution incidents, contamination, and environmental damage, crucial for real estate investors managing properties with potential environmental risks.
Geographic diversification is a real estate investment strategy that involves spreading investments across different geographical regions or markets to mitigate localized risks and enhance portfolio stability and potential returns.
Gross negligence is a severe form of carelessness, demonstrating a conscious and voluntary disregard for the safety or rights of others, often leading to significant harm or loss in real estate contexts.
Hedging in real estate investing involves employing strategies or financial instruments to offset potential losses from adverse price movements, interest rate fluctuations, or other market risks, thereby protecting an investment's value or cash flow.
Hedging in real estate is a risk management strategy involving the use of financial instruments or offsetting positions to mitigate potential losses from adverse market movements, such as interest rate fluctuations or property value declines.
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.
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