Real Estate Terms
A person who purchases property with the intention of retaining that property for investment purposes.
What is an Investor?
The term when no taxes will ever be assessed.
What is Tax Free?
The value of a business in excess of all liabilities against the business.
What is Equity?
An amount of money, goods, or services that have been contributed to a company in exchange for ownership.
What is Capital?
Maintenance and repair costs incurred to rehabilitate a property to get it ready for sale or rent.
What are Fix-up expenses (a.k.a. make-ready expenses)?
Taxes are either this or specific. A tax of $5 per $51,000 of value is an example of this, whereas a tax of $5 per house is specific.
What is Ad Valorem (according to value)?
Additional fees paid to a lender. Points are generally stated as a percentage of the total amount paid by the person who borrowed the money.
What are Points?
The loss experienced by a business or individual when business deductions exceed business income for the fiscal year.
What is Net Operating Loss?
An agreement by which an owner of real property gives the right of possession to another for a specified period of time and for a specified consideration.
What is a Lease?
As determined by the IRS, an individual who has met the hours-worked criteria for real estate activities.
What is a Real estate Professional?
A specific type of financing through which a borrower waives funds. Private investors or companies typically issue hard money loans. Interest rates are generally higher than those for conventional commercial or residential property loans because of the loan’s higher risk and shorter duration.
What is Hard Money?
A balance sheet that shows what a business owns or is due, including bank accounts, equipment, vehicles, and buildings. Typical breakdown would include fixed assets, current assets, and noncurrent assets. Fixed assets are equipment, buildings, and vehicles.
What are Assets?
The landlord in a contract.
What is a Lessor?
The portion of gain on the disposition of an asset that is taxable.
What is Recognized Income?
Debt that is due to be paid after one year, including bonds, debentures, bank debt, mortgages, and capital lease obligations.
What is Long-term Debt?
Those assets of a company that are reasonably expected to be sold, realized in cash, or consumed during the normal operating cycle of the business (usually one year). Such assets include cash, accounts receivable, and money due usually within one year; short-term investments; government bonds; inventories; and prepaid expenses.
What are Current Assets?
Refers to property that is similar to another for which it has been exchanged. The definitions of like kind properties can be found in the United States tax code at Section 1031 and the related regulations, revenue rulings, revenue procedures, and case law.
What is Like Kind?
When a fixed asset is sold at a value more than the depreciable basis (original asset minus accumulated depreciation), the difference is often referred to as capital gains. These gains are either short term (assets had been held less than one year) or long term (asset had been held for more than a year).
What are Capital Gains?
The mortgage on a property that can be assumed by another party at the time of purchase without that party having to qualify.
What is Assumable Mortgage?
Profit that has been made but not yet realized or collected through a transaction.
What is Unrealized income?