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.
The Internal Rate of Return (IRR) is a sophisticated financial metric used in capital budgeting to estimate the profitability of potential investments, representing the discount rate at which the net present value (NPV) of all cash flows from a particular project equals zero.
Inventory turnover measures how quickly a company sells its inventory and replaces it. In real estate, it is a critical metric for developers and fix-and-flip investors to assess how efficiently they convert properties into sales, directly impacting liquidity and profitability.
Inventory valuation in real estate is the process of assigning a monetary value to properties held for sale or development, crucial for financial reporting and investment analysis.
An investment account is a financial account used to hold various investment assets, such as stocks, bonds, mutual funds, and real estate-related securities, facilitating wealth accumulation and specific financial goals.
An investment budget is a detailed financial plan outlining all anticipated costs, income, and cash flow associated with a real estate investment property, helping investors manage funds and assess profitability.
Investment capacity is an investor's total ability to acquire and manage new real estate assets, considering financial resources, debt access, risk tolerance, and operational capabilities. It dictates the scale and pace of portfolio expansion.
A systematic list of criteria and steps investors use to evaluate potential real estate properties, ensuring thorough due diligence and alignment with investment goals.
Investment criteria are a set of predefined standards and metrics that real estate investors use to evaluate potential properties, ensuring alignment with their financial goals, risk tolerance, and investment strategy.
Investment decision making is the structured process of evaluating potential real estate acquisitions, assessing their financial viability and risks, and determining whether to proceed with an investment based on predefined objectives and market analysis.
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.
An Investment Manager is a professional or firm responsible for managing a portfolio of real estate assets or funds on behalf of clients, aiming to achieve specific investment objectives and maximize returns.
The total monetary inflows an investor receives from their real estate assets, including rental income, loan repayments, or distributions from partnerships, before deducting any expenses.
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