Glossary of Terms

Identification Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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Independent Trustee

A trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust.

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Index Fund

An index fund is a type of mutual fund or exchange traded fund (ETF) that is constructed to mimic the components of a market index, such as the S&P 500. Index funds are used to achieve broad market exposure, in an effort to reduce risk specific to a particular industry or stock. Index funds allow investors to capture the performance of the stock market in aggregate, instead having to go through the research and guesswork of investing in an individual stocks or industries.

Due to the fact that index fund investments require less effort on behalf of its manager, fees are typically less than more actively managed funds. While index fund expense ratios sit around 0.05% to 0.07%, actively managed funds typically see fees within the 1% to 3% range.*

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Infill Location

A real estate development site that exists within a mostly built out market. Usually located within an urban area, infill locations look to fill the few vacant lots that exist between other developments in the area. Infill locations are characterized by having a high level of demand, due to increased property values in desirable locations, with high barriers to entry.

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The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

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Institutional-Grade Property

While not a precisely defined term, an institutional-grade, or institutional-quality property generally refers to a property of sufficient size and stature to

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Insurable Value

The maximum dollar amount an insurance policy will cover in the event that an insured asset is deemed lost. In real estate, this can include the improvements on the land, as well as the physical property that existed on the property, such as machinery and other equipment. Insurable value is can be a function of the full replacement cost of the property, reproduction cost, or depreciated value. Insurable value is typically less than the market value, as it excludes the value of land.

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Intangible Property

Intangible personal property is something of individual value that cannot be touched or held.

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Interest Expense Deduction

Interest expense deduction is defined as a borrowing expense that a taxpayer can claim to reduce their taxable income. There are many types of interest that can be tax-deductible such as mortgage interest, student loan interest, investment property loan, interest on some business loans.

For example, if an investor has a 30% marginal tax rate and has $10,000 in tax deductible income, they would save $3,000 in taxes. Effectively that $10,000 loan only cost $7,000.

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Interest Rate

The interest rate is the percent of principal charged by a lender for the use of its money. Interest rates are typically expressed on an annual basis, or annual percentage rate (APR). To the borrower, the interest rate is the cost of debt, and to the lender, the interest rate will be the rate of return. Interest rates are reflective of how much risk the lender thinks it is assuming by lending to a particular borrower. Higher interest rates are typically given to entities more susceptible to default, or a lower credit rating.

In addition to credit rating, interest rates are determined by other extraneous factors. This includes the supply and demand for credit, inflation, and monetary policy set by the U.S. Federal Reserve. In situations where a loan is backed by collateral, a borrower may be able to obtain a lower rate than if the property was not secured.

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Interest Rate Risk

The risk that an investment's value will change due to a change in the level of interest rates. These changes usually have an inverse effect on

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Interest-Only Loan

A loan in which, for a set period of time, the borrower pays only interest on the principal balance, with the principal balance remaining unchanged.

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An entity that acts as the middleman between two parties in a financial transaction.

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Internal Rate Of Return (IRR)

The discount rate at which the net present value of all cash flows (both positive and negative) from a project or investment equal zero.

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Investment Property

A broad term for a real estate property that has been purchased with the intention of earning a return on the investment, either through

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Investment Vehicle

Any product used by investors to achieve a positive return on their money, although a favorable return is not guaranteed. Investment vehicles span all asset classes, and include ownership investments, lending investments, cash equivalents, and pooled investment structures such as a mutual fund.

For investors looking to diversify past asset classes as a whole, holding several types of investment vehicles may help further spread risk.* For example, corporate bonds and Treasury Inflation-Protected Securities (TIPS) each allow an investor to put his or her money into a debt instrument, but are subject to different market pressures and risks. Likewise, from a real estate perspective, investment may be made through various investment vehicles including LLCs, Limited Partnerships, REITs, or Delaware Statutory Trusts, with each vehicle having its own set of strengths and risks.

*Diversification does guarantee returns and does not protect against loss.

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Qualified Opportunity Zone Partnership Interest

Qualified Opportunity Zone Property also includes certain interests in a partnership, with requirements substantially identical to those applicable to Opportunity Zone Stock but which would apply when the business is organized as a partnership rather than a corporation.

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Traditional IRA

A retirement account that allows an individual to allocate pretax income toward investments that can grow tax-deferred. Income contributed to the account is limited, and may be deductible from taxable income based on the taxpayers amount of income and filing status. Capital gains taxes or dividend income taxes are only assessed once funds are withdrawn from the account.

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