Contracts, regulations, compliance, entity structures, zoning, permits, and landlord-tenant law.
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Foundation terms you need to know first (88 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.
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 absolute auction is a type of real estate auction where the property is sold to the highest bidder, regardless of the price, with no minimum bid or reserve price set by the seller.
The Lease Commencement Date is the official date specified in a lease agreement when the tenant's rights and obligations, including rent payments and property responsibilities, legally begin.
An application fee is a non-refundable charge paid by a prospective tenant to a landlord or property manager to cover the costs associated with processing a rental application, including background and credit checks.
Complex strategies and professional concepts (103 terms)
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 legally binding contract that alters the priority of liens on a property, allowing a senior lienholder to voluntarily place their claim in a junior position to another, typically to facilitate new financing or complex transactions.
Unrelated Business Income Tax (UBIT) is a tax levied on the net income of a tax-exempt organization, including certain real estate investment vehicles, derived from a trade or business regularly carried on and not substantially related to its exempt purpose.
Inverse condemnation is a legal action initiated by a private property owner against a government entity to recover "just compensation" for a taking of their property, where the government has not formally exercised its power of eminent domain but has effectively deprived the owner of beneficial use or value.
Collateral is an asset or property pledged by a borrower to a lender to secure a loan, providing a guarantee for repayment and reducing the lender's risk.
A collateral assignment is a legal agreement where an asset, such as a promissory note, contract, or insurance policy, is pledged as security for a loan or obligation without transferring full ownership. The assignee (lender) gains a security interest in the asset, which can be exercised if the assignor (borrower) defaults.
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.
Commercial lease review is the meticulous examination of a commercial lease agreement by an investor or their legal counsel to understand all terms, conditions, financial obligations, and potential risks before acquisition or execution.
A commission in real estate is a fee paid to a real estate agent or broker for facilitating a property transaction, typically calculated as a percentage of the sale price.
Common Area Maintenance (CAM) refers to the costs associated with operating and maintaining shared areas in a commercial property, which are typically passed through to tenants as part of their lease agreements.
Community management oversees the daily operations, financial health, and maintenance of shared spaces within planned communities, such as homeowners associations (HOAs) and condominium complexes, to preserve property values and enhance resident quality of life.
Compliance risk in real estate investing refers to the potential for legal penalties, financial losses, and reputational damage resulting from failure to adhere to laws, regulations, and industry standards.
A situation where an individual or entity in real estate has competing interests that could influence their professional judgment or actions to their own benefit, potentially at the expense of another party.
Consequential damages are indirect losses that result from a breach of contract or other legal wrong, but are not directly caused by the breach itself. They represent losses that were foreseeable at the time the contract was made.
Consideration in real estate refers to the value exchanged between parties in a contract, essential for its legal enforceability. It can be money, property, services, or a promise to perform an action, ensuring mutual commitment to the agreement.
Construction costs encompass all expenses incurred during the building or renovation of a real estate project, including materials, labor, permits, and professional fees. These costs are critical for determining project feasibility and profitability.
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