Basic investment concepts, portfolio theory, asset allocation, stocks, bonds, mutual funds, and ETFs.
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Foundation terms you need to know first (65 terms)
A lump sum investment in real estate involves committing a single, large amount of capital upfront to acquire a property or fund a project, rather than making smaller, periodic contributions. It's a direct approach often used for full property purchases or significant down payments.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Liabilities are financial obligations or debts that an individual or business owes to others, representing money that must be paid back in the future.
The percentage of your disposable income that you save rather than spend, a key metric for personal finance and crucial for building capital for real estate investments.
The fundamental resources—land, labor, capital, and entrepreneurship—used to produce goods and services, including real estate, and are crucial for understanding economic activity and investment potential.
Complex strategies and professional concepts (5 terms)
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.
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.
The Sharpe Ratio is a measure of risk-adjusted return, indicating the average return earned in excess of the risk-free rate per unit of total risk (volatility or standard deviation). It helps investors understand the return of an investment compared to its risk.
The Securities and Exchange Commission (SEC) is an independent agency of the U.S. federal government responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. It regulates publicly traded securities, including those related to real estate.
Modern Portfolio Theory (MPT) is an investment framework that aims to maximize portfolio expected return for a given level of market risk, or equivalently, minimize risk for a given level of expected return, through diversification.
An Individual Retirement Account (IRA) is a tax-advantaged savings plan designed to help individuals save for retirement, offering benefits like tax-deferred growth or tax-free withdrawals.
Interest income is the money earned by lending funds or investing in debt instruments, representing the cost a borrower pays for using the lender's money. For real estate investors, it often comes from private loans or seller financing.
An investment account is a financial account used to hold various investment assets, such as stocks, bonds, mutual funds, and real estate-related securities, facilitating wealth accumulation and specific financial goals.
An investment budget is a detailed financial plan outlining all anticipated costs, income, and cash flow associated with a real estate investment property, helping investors manage funds and assess profitability.
An Investment Club is a group of individuals who combine their funds and expertise to collectively invest in assets, often real estate, sharing both the risks and rewards.
Investment goals are specific, measurable objectives that guide your real estate investment decisions, helping you define what you want to achieve and by when.
The planned length of time an investor intends to hold a real estate asset before selling it. It significantly influences investment strategies and expected returns.
An Investment Philosophy is a comprehensive set of beliefs and principles that guide an investor's decision-making, aligning their financial goals, risk tolerance, and preferred strategies into a consistent approach.
Liabilities are financial obligations or debts that an individual or business owes to others, representing money that must be paid back in the future.
A liability is a financial obligation or debt owed by an individual or entity to another, representing claims against assets that must be settled in the future.
Liquid assets are resources that can be quickly and easily converted into cash without losing significant value, providing financial flexibility and a safety net for investors.
Loan approval is a lender's official decision to provide financing for a property purchase, based on a comprehensive evaluation of the borrower's financial stability and the property's value.
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