Bad Title

Bad title is title to a property that does not grant distinct ownership. Often used in the context of real estate, bad title results in the interests in real property not being transferred properly to the new owner. A product of unpaid taxes and liens, faulty transfer documents, building code violations, among other reasons, any encumbrance causing the cloud on title must be remedied before title can be fully transferred.

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Bail Bond

When a person is charged with a crime, a bail hearing is set. The defendant then has three options leading up to the hearing. 1.) Pay nothing and sit in jail while they wait for the hearing. 2.) Pay the bail in full and do not go to jail while waiting for the hearing. A title to a home can be used in lieu of cash to pay for the bond. 3.) Pay for a bail bond and do not go to jail while waiting for the hearing. The defendant will generally pay 10% of the bail bond. The bail bondsman will also charge fees. The more violent the crime, the higher bail will be set. The U.S. and the Philippines are the only two countries that have bail bonds.

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Balance of Payments

The balance of payments (BOP) for a nation consists of three categories: Current Account, Capital Account, and Finance Account. Transactions between nations create debits and credits in these accounts, depending on which direction transactions are moving (into or out of a country). The current account consists of finished goods. The capital account consists of capital transactions. The finance account records payment flows related to changes in ownership of international financial assets and liabilities such as portfolio investment, direct investment, and reserve assets. The balance of payments should equal zero, which means that the current account = capital account + finance account. Although in practice, that rarely happens. An advantage of the BOP is that it allows countries to identify trends, both negative and positive.

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Balance Of Trade

Balance of trade is defined as the difference between the value of a nation’s imports and exports over a defined period of time. A country is considered to have a trade deficit if the value of the goods it imports exceeds the value of the goods it exports. A country has a trade surplus when the value of its exports exceeds the value of its imports. A country’s balance of trade is a metric used to quantify the relative strength of that country’s economy.
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Balance Sheet

A balance sheet is a financial sheet that lists a firm’s assets, liabilities and equity at a point in time. The balance sheet provides a firm and its stakeholders a look at a point in time of what it owns, what it owes, and the difference of the value of its assets and the sum of its liabilities.

Used in tandem with financial statements such as the income statement and statement of cash flows which illustrate a firm’s performance over a period of time, a balance sheet illustrates the firm’s standing at the beginning and end of said period.

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Balanced Budget

A balanced budget occurs when revenues are equal to or greater than expenses. When a company spends more than it makes, it incurs a net loss. Too many quarters like that and the company can go out of business. A budget is generally considered balanced only after a year of revenue and expense generation. When revenues exceed expenses, a budget surplus occurs. A budget surplus can provide an excess of cash that can then be invested in future projects or stored away for difficult times.

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Balloon Payment

A balloon payment is a large payment due at the end of a loan’s life. This type of payment usually occurs over the life of a short-term loan, which has only been amortized partially over the course of the loan’s term. The balloon payment is the final repayment of the loan’s remaining balance.

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A bank is a financial institution regulated by a regulatory body. A bank receives deposits and issues loans. Banks can also provide financial services that include wealth management, currency exchange and safe deposit boxes.

There are two types of banks: commercial banks and investment banks. Commercial banks primarily manage the funds of their customers in checking and/or savings accounts and by issuing loans to individuals and businesses. Investment banks provide services to corporate clients that include underwriting and merger and acquisition activities.

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Bank Run

A bank run is created when customers begin withdrawing their money en masse because they believe the bank will fail (i.e., become insolvent). After customers begin withdrawing their money in a panic, it causes more customers to withdraw money. If enough customers withdraw their money, the bank will default. Basically, the bank runs out of money. The FDIC was established in 1933 as a result of bank runs.

Bank runs are not as common in modern times because many customers know that their deposits are insured by the FDIC. This doesn’t mean a bank run can’t occur. Banks don’t keep all of their customer deposits on-site. For security reasons and regulations from the Federal Reserve, only a small percentage of actual deposits are kept in the bank.

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Bankruptcy Remote

Bankruptcy remote is typically used when discussing a special purpose entity. A bankruptcy remote entity is a separate legal entity whose bankruptcy or insolvency

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Base Rent

Base rent is the minimum monthly rent due pursuant to a lease. Base rent does not account for expense reimbursements or percentage rent, which 

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Basis, in the context of commercial real estate, is an asset’s basis is the original purchase price or cost of investment property plus any out-of-pocket

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Basis Point

The basis point is a common unit of measurement used in the field of finance. One basis point is equal to 1/100th of 1% (0.01%). Basis points are used primarily for noting changes in interest rates, yields, and equity indexes, and are used by analysts to minimize confusion when discussing percent changes in financial instruments. 

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Bear Market

A bear market occurs when the stock market falls by 20% from its highs for at least a two month period. As a bear market starts and prices begin tumbling, investors sell into fear, fueling the downturn. The last sustained, large bear market was the Financial Crisis, in which the S&P 500 lost 50% of its value.

Bear markets come in two flavors — cyclical and secular. A cyclical bear market lasts for only a few weeks or even months. A secular bear market lasts for years. During each of the two bear markets, there may be sharp rallies, but they do not last. The market reverts back lower and continues its downward trend.

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Beneficial Interest

A beneficial interest, typically referred to in manners concerning trusts,  is the right to receive benefit from assets held by another party. 

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Beneficiary is any person who is eligible to receive distributions from a trust, will, or life insurance policy.

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A measure of systematic risk given to a security or portfolio, beta measures the volatility of a given financial instrument in comparison to the market as a whole. Often used in financial analysis, beta helps determine an asset’s expected return based off the capital asset pricing model.

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Blanket Mortgage

A blanket mortgage is a type of mortgage that finances more than one piece of real estate. Similar to a conventional mortgage, the real estate acts as collateral under the loan, and depending on the terms, the individual pieces of real estate may be sold without retiring the entire mortgage.

In practice, blanket mortgages allow the mortgagee to aggregate its debt obligations under a single loan to a single lender. Due to the size and scope of the loan, the borrower may have the ability to negotiate better terms and achieve a lower interest rates. In addition, a borrower may be able to save on application and closing costs associated with taking on multiple mortgages.

The disadvantages of a blanket mortgage include the capability of the lender to foreclose on all of the properties serving collateral in the scenario that the borrower defaults. In addition, blanket mortgages are typically unable to cover properties across numerous states, as each state has unique guidelines regarding how blanket mortgages are issued.

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Blind Pool

A blind pool is a limited partnership that raises funds from investors with no specific investment thesis. Typically managed by a general partner, the blind pool’s goal is broadly defined as growth or income, perhaps with a focus on a specific sector or sectors, but provides the general partner decision making autonomy in the allocation of capital.
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Blockchain is a type of record-keeping system. Unlike a centralized database, where one entity is the source of record, a blockchain database is distributed. This structure is called a distributed ledger. Within a distributed ledger, the database is pushed to multiple nodes (i.e., machines) within the network. Certain nodes verify each transaction. These verifying nodes must reach a consensus for the transaction to be committed into the ledger and be redistributed. The consensus of transactions is a key element of blockchains. No one authority is able to take control of a blockchain. Blockchains are also the backbone of cryptocurrencies.

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Blue Chip Stocks

Blue chip stocks are considered stable, low-risk investments. They are the largest companies trading in the stock market. The blue chip refers to the blue chips used in poker. They are the highest value chips available. Blue chip stocks pay consistent dividends that increase over time. When the economy is coming out of recession, blue chip stocks are not expected to recover as quickly as small cap stocks but they are also not expected to be as impacted going into recession. Blue chip stocks have been around for years and, in most cases, decades. They include companies such as Coke, IBM, Apple, Microsoft, Google, and Intel.

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Board of Directors

A board of directors is a governing body within a public company. Some private companies and nonprofit organizations also have a board of directors. The board of directors is a type of checks and balances on major decisions within the company. These decisions include the direction of the company, hiring and firing executives, and acquisitions. It’s important that the board of directors is made up of a diverse group of individuals. If all members are older folks with seniority within the company, they may be biased in their decision-making. It isn’t uncommon for a board of directors to have outside members. Recruiting experienced people from the industry, such as previous CEOs, can add beneficial experience to the board.

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A bond is a fixed income instrument that represents a loan from an investor to a corporation or government. A bond is considered a fixed income security that is throughout of as an IOU between the individual lender and borrower with terms that outline the details of the loan and its regular payments. A bond is equipped with an end date when the principal of the loan is due back to the borrower in addition to the specific coupon amount that is due to the lender on a payment schedule, based on the variable or fixed interest rate assigned to the loan.
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Bond Economics

Bonds are used by corporations and governments to issue debt. Investors buy these bonds to collect interest that must be paid by the bond issuer. Interest can be variable or fixed. Most bonds have an ending date, which is when the return of principal occurs. Although some bonds are perpetual and have no ending date.

Interest rates are determined by the credit of the bond issuer. Higher credit ratings equal lower interest rates. Bonds are issued to finance the growth of a country or corporation. For corporations that can’t find favorable bank financing, bonds can be a great alternative.

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Bondable Lease

See Absolute Triple Net Lease.

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Boot, although not specifically defined (or even mentioned) in IRC Section 1031, is commonly used and refers to the fair market value of cash,

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Brand Equity

Brand equity is an intelligible asset. It is the amount of trust and credibility that consumers have in a brand. It takes years to build up brand equity. Companies such as Nike, Amazon, and a number of luxury automakers have built up lots of brand equity. When these companies come out with a new product, instead of creating a completely new marketing campaign, they are able to leverage their existing brand equity. This means a more cost-effective marketing campaign can be created. Companies have to be careful to protect their brand equity. What took years to create can easily be destroyed in just a few days with the wrong communication or actions.

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In a June 23, 2016 referendum, the U.K. voted to leave the European Union, making it the first EU country to do so. The event became known as Brexit, short for British exit. David Cameron, the then prime minister, resigned the next day. Theresa May, who replaced Cameron, tried three times to negotiate a deal with the EU, but failed on all accounts. The former mayor of London, Boris Johnson, is now prime minister and a Brexit supporter.

As of now, the U.K. remains in the EU, due to multiple extensions. Once the U.K. leaves the EU, and depending on the deal if leaves with, it will no longer be a part of the customs union and single market. Being outside of the EU will lead to increased commerce cost and transit time between the U.K. and EU countries.

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Bridge Loan

Bridge loan is a short-term loan that is used until a person or company secures permanent, longer-term financing or fulfills an existing obligation. 

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Broker Dealer

Broker dealer is a person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction.

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Budget Deficit

When a business spends more than it earns, it must use credit or debt to cover the shortfall. When a country spends more than it takes in, it experiences a budget deficit. The country must borrow to make up the shortfall (called a fiscal deficit).

A budget deficit isn’t necessarily a bad thing. Countries that are expanding and expect more revenue in the future as a result will often experience budget deficits. The make up for the deficit, the country will issue bonds. This is similar to an asset backed loan. Of course, loans have interest that must be paid and so do bonds. If a country’s budget deficit gets out of control and it has to continually issue bonds, the country’s credit rating may fall, causing interest payments to increase. This can create spiral where the country is not able to take in enough revenue to meet its ever-increasing interest payments.

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Budget Surplus

A budget surplus occurs when a government is running efficiently. It is generating more revenues than expenses and therefore has money left over. Individuals prefer to call a surplus “savings.” When the economy is doing well, there is less demand for government services since more people are employed.

When a government creates a surplus, whether, at the federal, state, or local level, citizens will often call for taxes to be lowered. Basically, they are saying that the government has a surplus because it charged too much in taxes. A surplus may be put aside as part of a rainy day fund or to pay off debt that was incurred during a budget deficit.

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Build-to-Suit (BTS)

Built-to-suit is a way of leasing commercial property whereas the developer/owner has constructed a building to the specifications of a particular tenant or type of tenant. This type of property is popular among tenants because of its ability to offer efficient layouts, reduce operating costs associated with the property, or create a building design that may be more favorable in the public eye.

Build-to-suit properties are common in retail and industrial property types, but may exist in any type of real estate such as office space. Given that a building is designed specifically for the tenant, leases are typically longer-term, and tenants may be less inclined to vacate the property.

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Bull Market

A bull market is a term used to describe a financial market where the values of a particular group of securities are expected to rise. The term is most widely used when describing the stock market under conditions where an array of securities appreciate in value over an extended period of time, whether that be months or years. 

Bull markets are driven by investor optimism and confidence that the price of an asset today will be less than the price of the asset in the future.

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Business Cycle

Business cycle is a term used to describe the cycle of economic activity that an economy experiences over time. Business cycles are characterized by expansion and contraction with regard to the output of goods and services in the described economy. 

There are six stages of a business cycle: expansion, peak, recession, depression, trough, and recovery. The National Bureau of Economic Research (NBER) measures and studies business cycles and defines the start and end dates of business cycles in the United States.

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Business Ethics

Business ethics is the study of policies and practices with regard to corporate governance. Business ethics are critical to a firm’s operations, as they ensure that a firm is operating in an ethical manner on behalf of its stakeholders. Businesses began to become increasingly concerned with business ethics in the 1960s as society began to become more concerned with environmental and social causes.
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Business Model

A business model outlines how a business plans to generate a profit. It encompasses the methods for creating revenue, identifies the target market and how to reach them, expenses, type of people the company should hire, and more. The two main components of a business model are pricing and cost. The gap between pricing and cost is profit.

The business model is a roadmap that shows how to put the business together and keep it going. From the business model, various financial projections can be made. This allows startups to attract investors and talent. Without a business model, founders will have a difficult time communicating how their company plans to turn a profit.

Value Proposition And Competitive Advantage

Some other important parts of the business model are the value proposition and competitive advantage. The value proposition is a description of the products or services being offered and why they appeal to the target market. A competitive advantage is what separates the company or its products apart from the competition. Companies with a competitive advantage can create a similar product to that of competitors but at a lower price or create a higher quality product. Either way, the company’s product appeals more to customers than that of competitor products.

Business Models Are Dynamic

Business models are not meant to be static. They must be periodically revised. As the market or technology changes, the business model needs to be updated to reflect shifts or advances, which the company should be able to take advantage of. Otherwise, competitors will seize on changes in the market and outpace the company.

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Business Plan

A business plan allows a company to create a written projection of how it will succeed. Because the plan is written out, others involved in the business can understand where the company is going and what is needed to get it there. Additionally, the plan is used for attracting investors, since all investors will want to review a detailed analysis of how the company will become profitable.

The business plan includes several important components — market size, marketing plan, costs, budget, customer profile, competitors, and timeframe to profitability. From the business plan, additional analysis can be performed, making the plan more accurate. Without a business plan, founders will have a difficult time describing their vision to others in detail, attracting investor money, or even getting a loan.

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Business Risk

Business risk is anything that jeopardizes a company’s ability to meet its financial goals. This type risk goes beyond the internal operations of a business, such as the actions of upper management, and can include external factors such as new regulations enacted by the government. By becoming aware of the different factors that may cause a particular business to fail, such as compliance and operational risk, a company may be able to enact a proper risk management strategy that mitigates specific risk that may affect their ability to drive revenue or control costs.
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Buying on Margin

Buying on margin is the process in which an investor purchases an asset with leverage by borrowing a balance from a bank or a stock broker. Buying on margin allows for an investor to purchase assets with, for example, 20 percent cash and 80 percent leverage, where the leverage is secured by marginable securities held by the investor. 

In order to buy on margin, an investor needs to apply for approval from a bank or broker. The degree of buying power an investor has access to is a function of the total dollar amount of purchases the investor can make with cash and securities holdings.

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Qualified Opportunity Zone Business

A trade or business (i) in which substantially all of the tangible property owned or leased by the entity is Opportunity Zone Business Property, and (ii) which (a) derives at least 50% of its gross income from the active conduct of a trade or business,  (b) uses a substantial portion of any intangible property in such trade or business, and (c) has less than 5% of its assets invested in non-qualified financial property. Notwithstanding the preceding, a trade or business will not qualify as an Opportunity Zone Business if it is engaged in owning or operating any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.

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Qualified Opportunity Zone Business Property

Tangible property used in a trade or business of a Qualified Opportunity Fund if such property (i) was acquired by purchase after December 31, 2017, (ii) the original use of such property in the Qualified Opportunity Zone commences with the Qualified Opportunity Fund or the Qualified Opportunity Fund substantially improves the property, and (iii) substantially all of the use of such property was in a Qualified Opportunity Zone during substantially all of the Qualified Opportunity Fund holding period for the property.

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What is a 1031 Exchange?

Download the Realized Ebook - What Is A 1031 Exchange?

What is Investment Property Wealth Management?

Manage risk and help maximize opportunity

Are DST Investments Right For Me?

Are DST Investments Right For Me?