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Intermediate terms

Essential Financial Accounts Terms

This curated collection includes key terms that might be helpful when exploring banking and financial accounts. It covers various account types and financial instruments crucial for managing, saving, and growing capital before and during your investment journey. These terms were selected based on common questions and areas where investors often need clarity.

Learning Path

1

Interest Income

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.

Beginner2 min
2

Emergency Fund

A readily accessible pool of money set aside to cover unexpected financial challenges, crucial for both personal and real estate investment stability.

Beginner2-3 min
3

Yield

Yield in real estate measures the annual income generated by an investment property as a percentage of its cost or equity, providing a key indicator of its income-producing efficiency.

Intermediate13-16 min
4

Property Operating Account

A Property Operating Account is a dedicated bank account used exclusively for managing all income and expenses associated with an investment property. It ensures financial separation, simplifies record-keeping, and provides a clear overview of the property's financial performance.

Intermediate4-5 min
5

Down Payment

A down payment is an initial upfront payment made when purchasing a property, representing a portion of the total purchase price and reducing the amount of money borrowed through a mortgage.

Intermediate15-18 min
6

Cash Reserve

A cash reserve is a dedicated fund for real estate investors to cover unexpected property expenses, vacancies, and major repairs, ensuring financial stability and protecting investment cash flow.

Beginner2-3 min
7

Qualified Intermediary

A Qualified Intermediary (QI) is a neutral third party that facilitates a 1031 exchange by holding sale proceeds from a relinquished property and using them to acquire a replacement property, preventing the taxpayer from having constructive receipt of funds and ensuring tax deferral.

Intermediate13-16 min
8

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by the equity in your home, allowing flexible borrowing and repayment up to a set limit.

Intermediate14-15 min
9

Line of Credit

A Line of Credit (LOC) is a flexible financing option that allows borrowers to draw funds as needed, up to a pre-approved limit, and only pay interest on the amount borrowed. It provides continuous access to capital, making it a versatile tool for real estate investors.

Intermediate6 min
10

1031 Exchange

A 1031 Exchange allows real estate investors to defer capital gains and depreciation recapture taxes when selling an investment property by reinvesting the proceeds into a new "like-kind" investment property within strict IRS timelines.

Advanced15-18 min
11

Capital Accumulation

Capital accumulation is the process of increasing one's wealth or assets over time by saving, investing, and reinvesting earnings to build a larger financial base.

Beginner5-6 min
12

Debt Service

Debt service is the total amount of principal and interest payments required to repay a loan over a specific period, typically for a mortgage or other property-related financing.

Beginner11-12 min
13

Escrow

A legal arrangement where a neutral third party holds funds and documents until specific conditions of a contract are met, ensuring a secure and fair transaction, especially in real estate.

Intermediate15-18 min
14

Earnest Money

Earnest money is a deposit made by a buyer to a seller, held in escrow, demonstrating the buyer's serious intent to purchase a property and serving as security against buyer default.

Intermediate13-14 min
15

Short-Term Capital

Short-term capital refers to funds or assets that are readily available for immediate use or are expected to be converted into cash within one year, crucial for covering operational expenses, bridging financing gaps, or seizing fleeting investment opportunities in real estate.

Intermediate5 min
16

Return on Investment

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.

Beginner13-14 min
17

Financial Planning

Financial planning is the comprehensive process of managing your money to achieve personal and investment goals, involving budgeting, saving, investing, and risk management.

Beginner5-6 min
18

Self-Directed IRA

A Self-Directed IRA (SDIRA) is a specialized retirement account allowing investors to hold alternative assets like real estate, private equity, and precious metals, offering enhanced control but requiring strict adherence to complex IRS regulations to avoid prohibited transactions and Unrelated Business Income Tax (UBIT).

Advanced11-12 min