What is the total debt ratio? Total debt ratio is a metric for calculating the percentage of assets financed by debt. Real estate investors can use this calculation to determine their liabilities and figure out whether their debts are too high. Investors often use it to calculate leverage—the amount of debt an investor has compared to equity. The higher …
What is a self-directed IRA? A self-directed IRA (SDIRA) is a retirement account that allows you to invest in assets other than stocks and bonds. With an SDIRA, you have total control over your investments, which can include real estate, precious metals, private companies, and more. When you open a self-directed IRA with an approved …
What is real estate owned? Real estate-owned property, or REO for short, is a term used to describe foreclosed property owned by a bank or lending institution. This type of property can be appealing to investors, as it often represents an opportunity to get a good deal on a piece of real estate. The bank …
What is the discount rate? In the financial realm, the term discount rate refers to one of two things: The first is the interest rate charged when banks take out short-term loans from the Federal Reserve. The second is used to determine a cash flow’s net present value or the sum of all positive and …
If you’re old enough to remember the dawn of Gmail, you probably were at one point offered vast sums of money by a prince in a distant land. These emails were an early version of fraud using the power of the internet, and the sophistication of such scams has evolved with sophisticated methods. Wire fraud …
What is a dividend? A dividend is a payment of some portion of a company’s earnings to its shareholders. It usually takes the form of cash payment, but it can also be made in additional shares of stock. The mechanism behind these payments is relatively simple. When you own stock in a company that offers …
What is earnest money? Earnest money is used by homebuyers to show the seller they’re serious about buying their home. It’s put down before closing and is also commonly referred to as a “good faith deposit” or “earnest money deposit.” Once a homebuyer and a home seller move into the purchase agreement phase of the …
What is DTI? DTI stands for debt-to-income and is a term used to describe the percentage of your monthly income before taxes that goes toward paying any debts. DTI is used in determining credit scores and lenders when deciding whether or not to loan money. Debts used to calculate debt to income ratio include car …
What is EBITDA? Earnings before interest, taxes, depreciation, and amortization (EBITDA, for short) is a metric that measures financial performance. Companies might find it a useful alternative to calculating net income. That’s because it figures out earnings without considering any accounting or financial deductions like tax, interest, and debts, so you can ignore all the …
What is a real estate bridge loan? A real estate bridge loan (or swing loan) is a type of financing that’s popular with both investors and homeowners. It “bridges” the gap between the time an investor’s initial funds run out and the point at which another funding source becomes available. It can be beneficial when …
