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Intermediate terms

Inflation & Economy: Investor Terminology Guide

This curated collection offers key terms that might be helpful when exploring the broader economic health impacting real estate investments. It's designed to be a quick reference for understanding commonly referenced concepts related to inflation, tenant stability, and operating costs. This guide provides clarity on essential terminology, not comprehensive economic education.

Learning Path

1

Property Taxes

Property taxes are recurring taxes levied by local governments on real estate, based on its assessed value, to fund public services and infrastructure.

Beginner12-13 min
2

Tenant Solvency

Tenant solvency refers to a prospective or current tenant's financial ability to meet their rental obligations and other financial commitments, indicating their reliability as a renter.

Intermediate5 min
3

Purchasing Power

Purchasing power refers to the amount of goods and services a unit of currency can buy, directly impacting an investor's ability to acquire real estate assets and the real value of their returns.

Intermediate11-12 min
4

Recession

A recession is a significant, widespread, and prolonged decline in economic activity, typically characterized by negative Gross Domestic Product (GDP) growth, rising unemployment, and reduced consumer spending, impacting real estate markets through decreased demand and property values.

Intermediate14-15 min
5

Operating Expenses

Operating expenses are the ongoing costs of running and maintaining a real estate investment property, excluding mortgage principal and interest payments, and capital expenditures.

Beginner13-14 min
6

Job Growth

Job growth refers to the increase in employed individuals within a geographic area, serving as a key economic indicator for real estate investors to gauge market health, demand for properties, and potential for appreciation and rental income.

Intermediate12-13 min
7

Utilities

Essential services like electricity, water, gas, and internet that are necessary for a property to be habitable and functional, impacting a real estate investor's operating expenses and cash flow.

Beginner3 min
8

Delinquency Rate

The delinquency rate is the percentage of loans or payments that are past due, indicating the financial health of a loan portfolio or the broader real estate market. It's a key metric for assessing credit risk and market stability.

Intermediate5 min
9

Cash Flow

Cash flow in real estate investing represents the net income generated by a property after all operating expenses and debt service payments have been made. Positive cash flow indicates profitability, while negative cash flow suggests a loss.

Intermediate2-3 min
10

Interest Rates

The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal over a specific period, significantly impacting real estate investment profitability and financing decisions.

Intermediate11-12 min
11

Property Maintenance

Property maintenance involves the ongoing care, repair, and upkeep of real estate assets to preserve their value, functionality, and safety, ensuring long-term profitability and tenant satisfaction for investors.

Intermediate14-15 min
12

Vacancy Rate

The vacancy rate is the percentage of all available rental units in a property or market that are currently unoccupied or not generating income, serving as a key indicator of a property's financial health and market demand.

Beginner13-14 min
13

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the total monetary value of all finished goods and services produced within a country's borders in a specific time period, typically a year or quarter.

Intermediate14-15 min
14

Economic Cycle

The natural fluctuation of the economy between periods of expansion and contraction, significantly influencing real estate market dynamics, property values, and investment strategies.

Intermediate5 min
15

Real Wages

Real wages represent the actual purchasing power of an individual's earnings, adjusted for inflation, providing a clearer picture of economic well-being and its impact on real estate affordability.

Intermediate5 min
16

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of currency over time.

Intermediate14-15 min
17

Capitalization Rate

The Capitalization Rate (Cap Rate) is a real estate valuation metric used to estimate the potential rate of return on an investment property, calculated by dividing its Net Operating Income (NOI) by its current market value.

Intermediate14-15 min
18

Wage Growth

Wage growth refers to the increase in the average earnings of workers over a specific period, reflecting changes in labor market conditions and economic productivity. It significantly influences consumer spending, inflation, and real estate market dynamics.

Intermediate4-6 min
19

Net Operating Income

Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.

Intermediate11-12 min
20

Rent Growth

Rent growth is the percentage increase in rental rates for a property or market over a specific period, directly impacting an investment's cash flow and valuation.

Intermediate4-6 min
21

Consumer Price Index

The Consumer Price Index (CPI) is an economic indicator measuring the average change over time in the prices paid by urban consumers for a market basket of goods and services, serving as a key gauge of inflation and purchasing power.

Intermediate15-18 min