What is a HELOC? Did you know that a home equity line of credit (HELOC) is a type of finance that can help investors improve the value of a property or purchase a new real estate asset? It’s a revolving line of credit, which means your lender might offer you additional credit if you make …
What Is an IRA? IRA stands for “Individual Retirement Account.” There are several types of IRAs, but all of them offer some tax advantages to help you fund your retirement years. IRAs can be invested in a broad range of assets, including mutual funds, stocks, bonds, and ETFs (exchange-traded funds). Some—but not all—IRAs can even …
What is an alternative investment? An alternative investment is an asset or strategy that falls outside the traditional stock, bond and cash markets. These investments can enhance portfolio diversification and risk management and generate additional returns. There are various alternative investments, including hedge funds, private equity, venture capital, real estate, commodities and derivatives. Each has …
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 …
