VA Loan
VA Loans are mortgages issued by private lenders, but partially guaranteed by the Department of Veterans Affairs. To be eligible to apply for a VA Loan one must meet one of the following criteria1:
Glossary
Vacancy Allowance
Vacancy allowance is a line item on a real estate pro forma that accounts for expected vacancy of the property. The specific allowance is dependent on the property type and supply and demand factors of the underlying market. The vacancy allowance applied during underwriting may be greater or less than the current actual vacancy rate the property is experiencing.
Vacancy Rate
Vacancy rate is the percentage of all available units or space in a rental property that are vacant compared to the total supply of units or space at a particular time.
Valuation
Valuation involves various methods for determining the value of a company and the price of its stock. Valuing a company is called fundamental analysis. Taking into account the company’s assets, profits, sales growth, and other related metrics, one can determine a value for a company. Dividing earnings by the average outstanding common shares of stock provides earnings per share (EPS), which can determine if a stock is over or undervalued, compared to competitors within its industry. Knowing that a company’s stock is overvalued can mean it is an investment to avoid, while one that is undervalued is may be a good investment.
Valuation, Cost Approach
Cost approach valuation is a real estate valuation method that bases a property’s market value off the cost it would take to build an equivalent structure. The cost approach takes into account the cost of land plus the cost of construction, less depreciation. Similar to its counterparts, the cost approach may have other forces that prove it inaccurate. For example, if vacant land is not available to compare against, the professional valuing the property will have to derive an estimate, making the end value less accurate.
Valuation, Income Approach (Direct Capitalization)
Valuation, income approach (direct capitalization) is a real estate appraisal method that values a property by taking net operating income and dividing it by a predetermined capitalization rate. The income valuation method is not suitable for valuing owner-occupied residential properties, as it relies on income produced as a function of the property’s overall value. The direct capitalization method estimates a single year’s income.
Valuation, Sales Comparison
Sales comparison valuation is a real estate appraisal method that estimates a property’s value by comparing it against other properties with similar attributes that have been sold recently. This approach considers all of the individual features of a property, adjusting the value to reflect a sum of all the property’s features. A sales comparison approach may be used to evaluate both commercial and residential property.
Value Add Property
Investment properties that need corrective action to fully realize their value. Value-add is a term given to describe one of the four major risk profiles of
Value-Added Tax
A value-added tax (VAT) is a consumption tax on a product as a firm adds value to it at each stage of a supply chain between the initial point of production and the sale to that consumer. It is measured as the difference between the cost of the product to the consumer and any costs of production that were untaxed. A value-added tax is imposed on the gross margin at various points of manufacture and distribution and is assessed at each stage. It is thus a tax on a consumer’s consumption instead of their income.
Variable Cost
A variable cost is an expense that fluctuates in proportion to a firm’s level of production. An example of a variable cost is a utility expense, which fluctuates on a monthly or annual basis depending on the amount of electricity and/or water a firm needs in the production of its goods or services. Variable costs differ from fixed costs, which do not change based on the production of a good or service. An example of a fixed cost is rent, which is a contractual amount to be paid on a regular schedule over a defined period of time.
Venture Capital
Venture capital is capital that startup companies with long-term growth potential receive from investors. Investors provide venture capital to firm’s with unproven records of success because of the future possibility of sometimes rapid growth. Venture capital differs from private equity primarily in that venture capital is funding or financing provided to a firm for the first time, whereas private equity provides a more established firm an equity infusion.
Vertical Integration
Vertical integration occurs when a firm acquires all facets of a supply chain in the pursuit of cost reduction and efficiency. There are two forms of integration: forward and backward integration. A firm in the business of distribution seeks forward integration by reducing transportation costs, etc., while a firm seeking backward integration is typically in manufacturing and reduces its costs in the process of combining inputs to create value in a finished product.
Volatility
The amount of uncertainty associated with the size of change in a security or market index’s value. In statistics, volatility is determined by the standard deviation or variance of returns for the same security or index. A higher volatility means that a security’s value is more unpredictable, typically carrying a greater amount of risk. A lower volatility means that the security’s value does not fluctuate as much, and tends to be more stable. For example, say Security A has fluctuated in value from $50 to $120 three times this year, while Security B has fluctuated between $70 to $80 three times as well. Given that Security A has changed in value at a higher variance from its average during this time period, it is said to be more volatile, or more unpredictable.
