Key financial calculations, ratios, and valuation methods used to analyze real estate investments and performance.
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Foundation terms you need to know first (92 terms)
Development costs are all the expenses incurred during the process of acquiring land, designing, constructing, and preparing a real estate project for use or sale, from start to finish.
Equity investment in real estate involves directly owning a portion or all of a property, providing the investor with an ownership stake and the potential to benefit from appreciation and rental income.
Accrual basis accounting records revenues when they are earned and expenses when they are incurred, regardless of when cash actually changes hands. This method provides a more accurate picture of a business's financial performance over time.
Base rent is the fixed, minimum rent amount paid by a tenant to a landlord for the use of a property, excluding additional charges like operating expenses, taxes, or utilities.
An office building is a commercial property designed for businesses to conduct administrative, professional, or commercial operations, offering spaces for work and meetings.
Complex strategies and professional concepts (127 terms)
Slow BRRRR is an advanced real estate investment strategy that extends the traditional BRRRR (Buy, Rehab, Rent, Refinance, Repeat) cycle over a longer period, often several years, to maximize equity appreciation and mitigate market risks.
An Equity-for-Property Swap is an advanced real estate investment strategy where an investor exchanges equity in one or more properties or entities for direct ownership of another property, often to achieve tax deferral, portfolio restructuring, or strategic asset acquisition.
The accounting process of recognizing the estimated cost of an Asset Retirement Obligation (ARO) as a liability and capitalizing a corresponding asset, which is then depreciated over its useful life, reflecting the future costs associated with retiring a long-lived asset.
A Personal Financial Stress Test is a systematic evaluation of an individual's or household's financial resilience against adverse economic scenarios, crucial for real estate investors to safeguard their portfolios.
Equity dilution occurs when a company or investment vehicle issues new shares, decreasing the ownership percentage of existing shareholders. In real estate, this often happens in syndications or partnerships when additional capital is raised.
Cost-Benefit Analysis (CBA) is a systematic process for comparing the total estimated costs of a project or decision with its total estimated benefits, typically expressed in monetary terms, to determine its overall feasibility and value.
Counterparty risk is the risk that a party to a contractual agreement will fail to fulfill its obligations, potentially leading to financial loss for the other party. In real estate, this can arise from various stakeholders, including lenders, borrowers, tenants, or joint venture partners.
Countertrade in real estate refers to a reciprocal form of international trade where goods or services are exchanged for property, or property for other assets, rather than for cash. It's often used to overcome currency restrictions or facilitate complex cross-border transactions.
A legal assurance in a deed, typically a warranty deed, guaranteeing that the conveyed property is free from any undisclosed liens, easements, or other burdens on the title at the time of transfer.
The coworking occupancy rate measures the percentage of available workspace in a coworking facility that is actively utilized over a specific period, directly impacting revenue and operational efficiency.
Coworking operating expenses are the recurring costs associated with running and maintaining a shared office space, excluding debt service and capital expenditures, directly impacting its profitability and valuation.
Coworking property valuation is the specialized process of assessing the market value of flexible workspace assets, considering their unique operational models, revenue streams, and market dynamics distinct from traditional commercial real estate.
The Critical Path Method (CPM) is a project management technique used to identify the sequence of activities that determines the shortest possible duration to complete a project, essential for optimizing real estate development timelines and resource allocation.
The Current Ratio is a liquidity metric that assesses a company's ability to meet its short-term obligations (due within one year) with its short-term assets, providing insight into its immediate financial health.
A DSCR loan is a non-qualified mortgage for real estate investors, where loan eligibility is determined by the investment property's Debt Service Coverage Ratio (DSCR), assessing its ability to generate enough income to cover its mortgage payments, rather than the borrower's personal income.
Days on Market (DOM) measures the number of days a property listing remains active on the Multiple Listing Service (MLS) before going under contract. It indicates how quickly properties are selling in a specific area.
The Debt Avalanche is a debt repayment strategy focused on paying off debts with the highest interest rates first, while making minimum payments on all other debts, to minimize total interest paid and accelerate debt elimination.
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