Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
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Foundation terms you need to know first (40 terms)
The marginal tax rate is the tax rate applied to your very last dollar of taxable income. It's crucial for real estate investors to understand how additional income or deductions will impact their tax bill.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Building investor confidence is the process of developing a strong belief in one's ability to make sound real estate investment decisions, manage risks, and achieve financial goals through continuous learning and practical experience.
Housing supply and demand refers to the fundamental economic principle that explains how the availability of homes (supply) and the desire for homes (demand) interact to determine housing prices and market conditions.
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.
Complex strategies and professional concepts (42 terms)
A market phenomenon where a declining real estate market appears to reverse and begin an upward trend, only to quickly resume its downward trajectory, trapping investors who bought into the false recovery. It often leads to significant losses for those who misinterpret the temporary rebound as a true market bottom.
The Case-Shiller Home Price Index is a leading measure of U.S. residential real estate values, tracking changes in home prices across 20 major metropolitan areas and nationally using a repeat-sales methodology.
The Accounts Payable Turnover Ratio measures how quickly a company pays off its suppliers and short-term debts, indicating the efficiency of its working capital management and liquidity.
Other Comprehensive Income (OCI) represents revenues, expenses, gains, and losses that are excluded from net income but are recognized in comprehensive income, reflecting changes in equity from non-owner sources. It captures certain unrealized gains and losses that bypass the income statement.
Demand elasticity measures the responsiveness of the quantity demanded of a good or service to a change in its price or other influencing factors, crucial for real estate market analysis and investment strategy.
An interest rate is the percentage charged by a lender for the use of borrowed money, typically expressed as an annual percentage of the principal amount.
The interest rate environment describes the prevailing level and trend of interest rates in an economy, significantly influencing borrowing costs, investment returns, and the overall real estate market dynamics.
Interest rate hikes refer to an increase in the benchmark interest rate set by a central bank, typically the Federal Reserve in the U.S., which influences borrowing costs across the economy, including mortgages and investment loans.
Interest rate risk is the potential for investment losses or reduced returns due to adverse changes in market interest rates, significantly impacting real estate valuations, financing costs, and cash flow projections.
An interest rate swap is a derivative contract where two parties agree to exchange future interest payments based on a specified notional principal amount, typically exchanging a fixed-rate payment for a floating-rate payment.
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.
Real estate inventory refers to the total number of properties currently available for sale in a specific market at a given time, serving as a key indicator of market supply.
The investment climate refers to the sum of economic, political, social, and regulatory factors that influence the attractiveness and risk of investing in a particular market or asset class.
Investment fraud refers to deceptive practices that induce investors to make purchases or sales based on false information, often resulting in significant financial losses. It encompasses a broad range of illicit schemes designed to exploit investor trust and capital.
Investment goal derailment occurs when an investor's real estate objectives are not met or are significantly delayed due to unexpected events or poor planning, leading to underperformance or losses.
The disciplined approach of allowing real estate investments sufficient time to mature and realize their full potential, often involving riding out short-term market fluctuations for long-term gains.
Irrational exuberance describes a period of unsustainable investor overconfidence and speculative buying that drives asset prices, such as real estate, far above their fundamental value, often leading to a market bubble and subsequent correction.
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Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.