Intermediate1.5 hours9 terms

REI Factor Market: Key Terminology

This curated collection offers key terms that might be helpful when exploring the factor market in real estate investment. It provides clear explanations of commonly referenced concepts to support your learning journey, not a complete guide. Use it as a quick reference to understand terminology you may encounter.

Term Collection

Factors of Production

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.

Beginner3 min

Cost of Capital

The Cost of Capital is the blended rate of return a real estate investment must generate to cover the costs of its financing, encompassing both debt and equity capital.

Intermediate14-15 min

Highest and Best Use

Highest and Best Use refers to the reasonably probable and legal use of a property that is physically possible, financially feasible, and results in the highest value, guiding optimal property utilization and investment decisions.

Intermediate13-14 min

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

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

Land Value

Land value refers to the inherent worth of a piece of land, separate from any buildings or improvements on it, driven by its location, potential use, and market demand.

Beginner2-3 min

Factor Market

A factor market in real estate refers to the market where the inputs or resources required for real estate development and operations are bought and sold, including land, labor, capital, and entrepreneurship.

Intermediate5 min

Zoning Regulations

Zoning regulations are local government laws that dictate how land within a municipality can be used, controlling property development, density, and the types of structures permitted.

Intermediate13-17 min

Capital Markets

Capital markets are financial markets where long-term debt or equity-backed securities are bought and sold, providing the funding necessary for businesses and governments, including real estate developers and investors, to finance their long-term projects.