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Intermediate45 minutes15 terms

Employer-Sponsored Plan Key Terms Reference

This curated collection offers key terms that might be helpful when exploring employer-sponsored retirement plans like 401(k)s and 403(b)s. It's designed as a quick reference to clarify commonly referenced concepts, not a comprehensive guide to retirement planning.

Term Collection

1

Inflation Hedge

An inflation hedge is an investment, such as real estate, that is expected to retain or increase its value and purchasing power during periods of rising inflation, protecting wealth from currency devaluation.

Intermediate13-14 min
2

Real Estate Investment Trust

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate, allowing individuals to invest in large-scale property portfolios through publicly traded shares.

Intermediate15-18 min
3

Long-Term Hold Strategy

A real estate investment strategy focused on acquiring and holding properties for an extended period, typically five years or more, to generate wealth through rental income, property appreciation, and tax benefits.

Intermediate5-6 min
4

Self-Directed 401(k)

A Self-Directed 401(k) is a retirement plan for self-employed individuals and small business owners with no full-time employees, allowing them to invest retirement funds in a broader range of assets, including real estate, private equity, and other alternative investments, beyond traditional stocks and bonds.

Intermediate9 min
5

Appreciation

Appreciation in real estate is the increase in a property's market value over time, leading to a profit for the owner when sold or refinanced. It is driven by market forces, economic growth, and property improvements.

Beginner12-13 min
6

Diversification

Diversification in real estate is the strategy of spreading investment capital across various assets, markets, or property types to reduce risk and enhance portfolio stability against market fluctuations.

Intermediate12-13 min
7

Cash Flow

Cash flow in real estate investing represents the net income generated by a property after all operating expenses and debt service payments have been made. Positive cash flow indicates profitability, while negative cash flow suggests a loss.

Intermediate2-3 min
8

Retirement Income

Retirement income refers to the money an individual receives to cover living expenses after they have stopped working full-time, ensuring financial security in their later years.

Beginner2-3 min
9

Rental Income

Rental income is the total revenue generated from an investment property through rent payments and other fees, before or after deducting operating expenses. It is a critical metric for evaluating a property's profitability and investment viability.

Intermediate15-18 min
10

Passive Income

Passive income refers to earnings from an enterprise in which an individual is not actively involved, typically generated from real estate investments like rental properties, REITs, or syndications, requiring minimal ongoing effort after initial setup.

Intermediate13-15 min
11

Cash-on-Cash Return

Cash-on-Cash Return (CoC) is a real estate investment metric that calculates the annual pre-tax cash flow generated by a property as a percentage of the total cash an investor has invested.

Intermediate15-18 min
12

Down Payment

A down payment is an initial upfront payment made when purchasing a property, representing a portion of the total purchase price and reducing the amount of money borrowed through a mortgage.

Intermediate15-18 min
13

Capital Preservation

Capital preservation is an investment objective focused on safeguarding the initial investment principal from loss, prioritizing risk minimization and stability over aggressive growth. It's a strategy to protect wealth, especially in volatile markets or for risk-averse investors.

Intermediate5-6 min
14

Self-Directed IRA

A Self-Directed IRA (SDIRA) is a specialized retirement account allowing investors to hold alternative assets like real estate, private equity, and precious metals, offering enhanced control but requiring strict adherence to complex IRS regulations to avoid prohibited transactions and Unrelated Business Income Tax (UBIT).

Advanced11-12 min
15

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

Common Questions