Intermediate45 minutes8 terms

Real Estate Exchange Ratio: Key Terms Collection

This collection offers carefully selected key terms that might be helpful when exploring exchange ratios in real estate investment. It provides clear explanations of commonly referenced concepts to support your learning journey. Use it as a quick reference to understand the terminology you may encounter.

Term Collection

Qualified Intermediary

A Qualified Intermediary (QI) is a neutral third party that facilitates a 1031 exchange by holding sale proceeds from a relinquished property and using them to acquire a replacement property, preventing the taxpayer from having constructive receipt of funds and ensuring tax deferral.

Intermediate13-16 min

Exchange Ratio

The exchange ratio defines the number of shares or units of one asset that will be received in exchange for each share or unit of another asset, commonly used in real estate syndications, mergers, or portfolio swaps to determine relative value.

Intermediate5 min

Tax Deferral

Tax deferral is the legal postponement of paying taxes on investment gains or income until a future date, allowing capital to remain invested and grow through compounding.

Intermediate13-16 min

Market Value

Market value in real estate is the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller acting prudently, knowledgeably, and typically uninfluenced by undue stimulus.

Beginner15-18 min

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

Capitalization Rate

The Capitalization Rate (Cap Rate) is a real estate valuation metric used to estimate the potential rate of return on an investment property, calculated by dividing its Net Operating Income (NOI) by its current market value.

Intermediate14-15 min

Net Operating Income

Net Operating Income (NOI) is a key real estate metric representing a property's annual income after deducting all operating expenses, but before accounting for debt service, income taxes, and capital expenditures.

Intermediate11-12 min

Appraisal

An appraisal is an unbiased, professional opinion of a property's market value, conducted by a licensed appraiser, primarily used for lending, buying, and selling decisions.