The Accelerated Cost Recovery System (ACRS) was a method used to depreciate property for tax purposes at an accelerated rate. Introduced by the Economic Recovery Tax Act of 1981 (ERTA), it allowed for quicker cost recovery of investments in tangible property.
An annuity in advance refers to a series of equal or nearly equal payments made at the beginning of each period, commonly used in financial products like rent and leases.
An annuity in arrears, also referred to as an ordinary annuity, is a financial product where payments are made at the end of each period. This type of payment structure impacts the present value and future value calculations of the annuity.
Arbitrage in real estate involves buying and selling properties, or financial instruments linked to real estate, in different markets to profit from price differences. This strategy can also include leveraging financial instruments like REITs or mortgage-backed securities to exploit discrepancies in pricing.
An informal, unincorporated organization of educational institutions established in 1983 to advance common interests in real estate administration, including management, leasing, investment, development, acquisition, and disposition.
A capital asset as defined in Section 1221 of the Internal Revenue Code (IRC) that receives favorable tax treatment upon sale contains various exclusions such as inventory, property held for resale, property used in a trade or business, certain copyrights, and specific U.S. government obligations.
Capital Recapture is the return of an investor's original investment in a property or business, often through income generated by that asset. It's also known as Capital Recovery.
Clawback provisions in laws or contracts limit or reverse a payment or distribution for specified reasons, ensuring financial fairness and compliance.
The Compound Amount of One Per Period represents the final value of a series of $1.00 deposits made at each period, with interest compounded at each period.
Curable Depreciation refers to a type of property deterioration that can be corrected at a cost that is less than the value it will add to the property.
A discount in the context of real estate represents the difference between the face amount of an obligation and the amount advanced or received for the loan. It often indicates the sale of a loan or mortgage at less than its face value.
An equity kicker, also known simply as “kicker,” is a form of equity participation that lenders or investors can demand as part of a loan agreement. It provides the lender the right to share in the future success of the borrowing venture, typically in the form of a percentage of ownership or profits.
Under Section 1031 of the Internal Revenue Code, like-kind property used in a trade or business or held as an investment can be exchanged tax-free.
A financial metric that adjusts the Internal Rate of Return (IRR) by considering practical aspects such as the cost of funds and returns from interim investments.
A floating rate is an interest rate on a loan, bond, or other fixed-income security that fluctuates over time according to a specific benchmark or index. This rate is not fixed and can change throughout the term of the financial instrument.
Fractional interest refers to a way of owning real estate where the owner possesses a portion or 'fraction' of the total asset, typically involving less than complete control over the whole property. This form of ownership is common in scenarios where multiple parties share the rights and responsibilities associated with a single piece of real estate.
A property right or estate that is anticipated to be enjoyed at a later time.
The Future Worth of One Per Period, also known as the Compound Amount of One Per Period, is a concept used in real estate finance and investment. It signifies the future value of a series of uniform periodic cash flows occurring at the end of each period when compounded at a certain interest rate.
An illiquid asset is an asset that cannot be quickly converted into cash without a substantial loss in value. This is a critical consideration in real estate investing, as properties can take considerable time to sell and often incur significant transaction costs.
An inflation hedge is an investment that is expected to maintain or increase its value over time, even as the purchasing power of money declines due to inflation.
An investment involves the allocation of resources, usually money, into assets or ventures with the expectation of generating income or profit. It aims at wealth preservation and enhancement.
A legal entity is an individual, company, or organization that has legal rights and obligations, including the ability to enter into contracts, sue and be sued, own assets, and borrow money.
The phrase 'Location, Location, Location' emphasizes that the location of a property is one of the primary factors influencing its value. The statement underscores that the geographical location outweighs almost all other variables in determining real estate prices.
Long-term capital gain refers to the profit earned from the sale of a capital asset that has been held for longer than a specified holding period, allowing it to qualify for favorable tax rates.
Long-term financing, also known as permanent mortgage, involves a loan with a long repayment period, typically extending over several years or decades. This form of financing is commonly used for purchasing real estate or significant capital investments, and provides borrowers with stability and predictable payment schedules.
Minority interest represents ownership or stake in an entity that is less than 50%. This type of interest does not grant controlling power but can offer significant financial interests or gains.
A collection of similar loans that are sold as a unit in the secondary market or used to back a security, ultimately sold in the capital markets.
A mortgage-backed security (MBS) is a type of financial instrument that is secured by a pool of mortgage loans, offering investors income streams derived from these mortgages.
A Passive Income Generator (PIG) is a business or investment vehicle that produces passive income, which can be used to offset passive losses incurred from other passive activities, particularly in the context of rental real estate.
Private placement is an investment approach where a security is sold directly to a small group of private investors, generally under exemptions to registration provided by the Securities and Exchange Commission (SEC) and state securities laws.
A prospectus is a formal document that offers detailed information about a business or investment for potential investors, typically involved in securities trading.
A public offering is the sale of investment units to the general public, typically requiring approval from regulatory authorities like the SEC or state securities agencies. It's an essential method for companies to raise capital by offering their securities to a wide array of potential investors. This should be contrasted with private offerings, which target a limited group of investors.
The Rate of Return is the percentage gain or loss on an investment relative to its cost, offering a snapshot of the investment's profitability.
A Real Estate Mutual Fund is a regulated investment vehicle focused on investing in securities offered by real estate-related companies, including REITs, real estate development and management firms, and homebuilders.
The Real Estate Roundtable is an organization composed of leading owners, developers, and stakeholders in the real estate industry, focusing on legislative actions, policies, and government interventions affecting real estate finance, taxation, and investment.
Realty, also known as real estate, encompasses properties consisting of land and buildings on it, along with its natural resources like crops, minerals, or water. Realty is a crucial component of the economy and plays a significant role in investment, development, and personal wealth management.
A red herring is a preliminary prospectus filed by a company with the Securities and Exchange Commission (SEC), typically used in the process of going public. It provides potential investors with information about the company but is subject to change.
Return on Investment (ROI) measures the financial return on an investment as a percentage of the investment's cost, providing an indicator of profitability.
The risk premium is the difference between the required interest rate on an investment and the rate on risk-free investments such as U.S. Treasury securities. It compensates investors for taking on higher risk compared to risk-free assets.
A Securitized Investment Vehicle (SIV) is a pool of investment assets that are combined and then split into smaller units to be sold to investors as securities.
Semiannual refers to an event or occurrence that happens twice a year, in other words, once every six months. In real estate and finance, semiannual terms often apply to payments, interest, and reporting periods.
Shares of Beneficial Interest represent a fractional ownership interest in the assets of a trust or other fiduciary arrangement, entitling the shareholder to a proportionate share of the earnings and profits.
A short-term capital gain refers to the profit from the sale of a capital asset that was held for less than 12 months. Unlike long-term capital gains, these gains are typically taxed at higher rates corresponding to ordinary income.
Soft money refers to contributions that can be tax-deductible in a development or investment context. It also sometimes describes non-physical construction costs such as interest during construction, architectural fees, and legal fees.
A speculator is an investor who engages in risky financial transactions with the hope of substantial gains by forecasting future market events.
The Time Value of Money (TVM) is a financial concept that asserts money available at the present time is worth more than the same amount in the future due to its earning potential.
Unearned Increment refers to an increase in the value of real estate that occurs independent of any actions or improvements made by the property owner. This typically results from external economic or societal factors such as population growth or infrastructure development.
Value in real estate represents the worth of all the rights arising from ownership. It quantifies the amount of one commodity that will be exchanged for another under specific conditions.
