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 Quick Ratio, also known as the Acid-Test Ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory. It provides a more stringent view of liquidity than the Current Ratio.
A REIT dividend is a regular payment made by a Real Estate Investment Trust (REIT) to its shareholders, representing a share of the income generated from its real estate investments.
A real estate appraiser is a licensed professional who provides an unbiased, expert opinion of a property's market value, crucial for transactions like mortgage lending and sales.
A Real Estate Business Plan is a detailed document outlining an investor's goals, strategies, and financial projections for acquiring, managing, and exiting real estate assets.
A real estate exit strategy is a predefined plan for how an investor will liquidate or conclude their involvement with a property, aiming to realize profits, recover capital, or mitigate losses.
A real estate financial model is a spreadsheet-based tool used to project the financial performance of an investment property, forecasting cash flows, expenses, and returns over a specific holding period to aid in investment analysis and decision-making.
Real estate financial modeling is the process of creating a quantitative representation of a real estate investment or development project to forecast its financial performance, assess risk, and support strategic decision-making.
Real estate forecasting is the process of predicting future trends and conditions in the property market, including prices, rents, vacancy rates, and economic indicators, to inform investment decisions.
A real estate fund is a pooled investment vehicle that allows multiple investors to combine their capital to invest in a portfolio of real estate properties or real estate-related assets, managed by professional fund managers.
Real estate investing is the practice of purchasing, owning, managing, and/or selling properties for profit, leveraging assets to generate income, capital appreciation, and tax benefits.
Real Estate Investment Analysis Software is a digital tool that helps investors evaluate potential property acquisitions by automating financial calculations, forecasting performance, and providing data-driven insights into profitability and risk.
Real estate investment budgeting is the process of creating a detailed financial plan to estimate all expected income and expenses associated with an investment property, guiding financial decisions and ensuring profitability.
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