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Intermediate45 minutes14 terms

Strategic Refinancing: Key Terms for Wealth Extraction

This curated collection offers key terms that might be helpful when exploring strategic refinancing for wealth extraction. Understand the terminology around tax-free debt, entity structures, and critical regulations. It serves as a quick reference to navigate these advanced liquidity strategies.

Term Collection

1

Liability

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.

Intermediate11-12 min
2

S Corporation

An S Corporation is a federal tax designation for eligible domestic corporations that allows profits and losses to be passed directly to the owners' personal income without being subject to corporate tax rates, avoiding double taxation.

Intermediate5-6 min
3

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
4

Property Appreciation

Property appreciation is the increase in a real estate asset's value over time, driven by market forces and investor improvements, leading to potential profit upon sale.

Beginner11-12 min
5

Tracing Rules

Tracing rules are legal and equitable principles used to identify and recover misappropriated assets, particularly in cases of commingled funds, fraud, or breach of fiduciary duty within complex investment structures like real estate syndications or partnerships.

Advanced5 min
6

Limited Liability Company

A Limited Liability Company (LLC) is a business structure that protects its owners' personal assets from business debts and liabilities, while offering flexible taxation options.

Intermediate13-14 min
7

Equity

Equity in real estate is the portion of a property's value that an owner truly owns, free and clear of any outstanding debts or liens. It is calculated as the property's current market value minus the total amount owed on any mortgages or loans.

Beginner12-13 min
8

Loan Proceeds

Loan proceeds represent the net amount of funds a borrower receives from a lender after all associated fees, charges, and deductions have been subtracted from the gross loan amount. These funds are typically used to finance a real estate purchase, refinance an existing property, or fund construction projects.

Intermediate5 min
9

Tax-Free Debt

Tax-free debt refers to financial strategies where the interest paid on borrowed money is tax-deductible, or the proceeds from a loan are not considered taxable income, providing significant tax advantages to real estate investors.

Intermediate4-6 min
10

Refinancing

Refinancing is the process of replacing an existing mortgage or loan with a new one, often to secure better terms, lower interest rates, or access built-up property equity.

Intermediate15-18 min
11

Strategic Refinancing

Strategic refinancing involves proactively restructuring existing real estate debt to achieve specific long-term investment objectives, such as optimizing cash flow, expanding a portfolio, or reducing overall risk exposure.

Advanced5 min
12

Liquidity Strategy

A liquidity strategy in real estate investing is a proactive plan to ensure an investor has sufficient accessible cash or assets that can be quickly converted to cash to meet financial obligations and capitalize on opportunities.

Intermediate5 min
13

Bonus Depreciation

Bonus depreciation is a tax incentive allowing businesses and real estate investors to immediately deduct a large percentage of the cost of eligible property in the year it's placed in service, accelerating tax savings and boosting cash flow.

Intermediate12-13 min
14

Liquidity

Liquidity in real estate refers to the ease and speed with which a property can be converted into cash at its fair market value. Real estate is typically considered an illiquid asset due to the time and costs involved in selling.

Intermediate5-6 min

Common Questions