What is market capitalization? Have you ever wanted to know the total amount of all the shares of stock a company owns? Market capitalization—or “market cap”—tells you exactly that. It’s one of the best ways to estimate a company’s financial value. Calculating the market cap is simple. Just multiply a company’s number of outstanding shares …
In real estate, the anchoring effect refers to subconsciously using irrelevant information or “anchor points” to make purchasing or investment decisions. In addition, the anchored meaning has to do with cognitive bias that occurs when making judgments about the quality, value, or worth of a specific property. What is the anchoring effect? When it comes …
Equity multiple essentially lets investors know how much money they stand to make on their upfront investment. What is equity multiple? Equity multiple is a commercial real estate term that refers to the total cash return an investment produces, divided by the total equity that was initially invested. If an investor uses the equity multiple …
What is LTV? As you build your real estate portfolio, you’ll encounter several acronyms that lenders and other investors use. Loan-to-value (LTV) is one of them. It’s a number that determines risk when someone takes out a secured home loan. You’ll need to understand this number—and how lenders calculate it—because it influences how much money …
What is the capitalization rate? Definition: The capitalization rate, also known as cap rate, is a term used to describe the expected rate of return on a real estate investment property. The most significant element to understand when it comes to capitalization rates is that real estate investors use cap rates to help determine whether they …
What is depreciation? Depreciation is a decrease in an asset’s value caused by wear and tear, age, or changes in the market. There are two primary ways in which depreciation is commonly understood. The first way is a method for investors to write off certain taxes, and the second way is the process by which …
What is a contingency? When it comes to real estate, a contingency is a clause in the purchase agreement that details actions and/or requirements to be met before the contract can become legally binding. The buyer and seller have to agree to the terms of all contingencies and sign off on them before the contract is …
What is yield? If you want to invest in real estate, you need to know about yield. It’s the term for the annual income generated by one of your investment properties. Yield is a percentage of the total amount an investment costs or its current value. Why is yield important? Because it measures the future …
What is it: Closing costs are the costs and fees charged to complete a real estate transaction. As the name might imply, the fees are due at closing, which is the finish line of a real estate purchase where ownership changes hands. The buyer is usually responsible for paying closing costs, but depending on the …
What is DTCC? The Depository Trust and Clearing Corporation (DTCC) is a U.S.-based financial services company focused on providing clearing and settlement services. It accepts deposits from more than 65 countries. The DTCC was founded in 1999 as a way to merge the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC). As such, …
