The profit or loss on an investment over a specified period of time expressed as proportion of the investment amount.
Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.
A licensed intermediary between buyers and sellers of real estate, typically working for commission. Real estate agent is a broad term which includes
A licensed intermediary between buyers and sellers of real estate, typically working for commission. A real estate broker typically has completed
Real estate debt is a debt instrument that the borrower is obliged to pay back with a predetermined set of payments. The debt instrument is secured by
The difference between the current fair market value of a property and the amount of debt owed against the property.
Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence or personal use.
A trust or company that owns, finances, or invests in real estate and/or real estate-related assets. REITs provide individuals the ability to invest in
An investor who evaluates the real estate market and purchases property with the intention of building wealth.
A method of pooling capital from multiple investors for the common goal of acquiring real estate.
Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing.
The amount of gain that the investor made from the sale of an asset. It is calculated as the net sales price received (sales price of the asset less any
A lease provision that grants a landlord the right to terminate a current lease, and take back possession to specific space or tenant suite. To take effect, there is typically a negotiated triggering event that has to occur. This includes a tenant “going dark” or failing to meet its percentage rent terms. Although common in commercial real estate leases, recapture clauses can be included in any contract in which an asset is exchanged.
For example, say Sarah owns XYZ Retail Center. The space is currently leased to Yummy Grocery, with a stated rent of 2% of its sales for a minimum of $2,000. Meaning, Yummy Grocery has to have sales of $100,000 to meet its rent obligation.
The next month, Yummy Grocery only does $80,000 in sales. Because Sarah negotiated a recapture clause in the lease, she may be able to terminate the lease and take back the space from Yummy and potentially replace it with a different tenant.
A term used to describe real estate assets that are tied to lifestyle trends, as opposed to economic cycles. These assets are less subject to downturns, and are subject to forces of the underlying market demographic. Recession-resistant real estate typically falls under three main asset classes: student housing, self-storage, and senior living.
The taxable portion of realized gains arising from the sale of an asset or assets. Recognized gains are typically less than realized gains due to
A type of loan that allows the lender to recover against the personal assets of a party in the event of default by the borrower to the extent of the
The payoff and replacement of an existing loan with a new loan, typically under different terms. Refinancing differs from debt restructuring, which is the modification of an existing loan. There are several reasons an investor may consider refinancing an existing loan including: 1) to improve on the loan’s interest rate; 2) to extend the loan’s maturity date; 3) to change the interest rate from variable to fixed, or vice versa; or 4) to access embedded equity by increasing the loan amount. Reasons 1 through 3 above are often referred to as “rate-and-term refinance” while reason 4 may be referred to as a “cash-out refinance.”
The ability of an investor to refinance a loan is dependant on a variety of factors including general market conditions, the availability of financing, the borrower's credit worthiness, and the value of the underlying property. Note however, that an investor may be constrained from refinancing a loan due to lockout provisions or prepayment penalties. Additionally, there may be costs associated with refinancing that may make it a less attractive option.
Reg A+ Offering is a Securities and Exchange Commission (SEC) regulation that allows public investment in private companies up to $50 million. Like an IPO, this type of offering allows companies to raise capital by offering shares to the general public.
A person or firm that is compensated for providing investment advisory services. Contrary to a broker who is transaction based, RIAs are typically compensated based off a percentage of assets under management, and have a fiduciary responsibility to their clients. RIAs compete with mutual funds, hedge funds, and wire house firms for clients.
A Securities and Exchange Commission (SEC) regulation governing private placement exemptions that allows companies to raise capital through
A business deal or arrangement between two parties who are joined by a personal or other relationship prior to the deal.
Generally speaking, related party issues are technical and we recommend consulting with your CPA or tax attorney to understand how the “related party” rules may impact your specific situation.
A provision or clause to release certain collateral from a loan or mortgage in exchange for the borrower’s payment of a defined amount.
In a tax deferred (aka 1031 exchange or like-kind) exchange, the property being sold or disposed of is referred to as the relinquished property.
In the context of commercial real estate, rent bumps refer to periodic adjustments on the rental rates pursuant to a lease, typically stated as a
Rentable Square Footage equals the usable square footage plus the tenant’s pro rata share of the building common areas, such as
In a tax deferred (aka 1031 exchange or like-kind) exchange, the property being purchased or acquired is referred to as the replacement property.
Replacement Property InterestsTM is the term Realized uses to describe equity ownership in large properties by multiple 1031 exchange investors through Delaware Statutory Trusts (DST) and Tenant-In-Common (TIC)
A retail investor is any individual who purchases and sells securities for his or her own investment portfolio. Similar to institutional investors, retail investors have the ability to engage in stock and bond markets, mutual funds, exchange traded funds, and other alternative investments, conducting trades through brokerage firms or saving accounts. Note, however, that a retail investor may need to meet a certain level of accreditation to participate in some investments, such as private equity, hedge funds, and certain private placements.
ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is
A contractual obligation by the owner of an asset to offer a sale to the rights holder before negotiating with any third party. Often included in tenant-landlord contracts, right of first offer provisions allow a tenant to make a reasonable offer before anyone else, with the intent of not having to move his or her business.
Although similar to a right of first refusal, a right of first offer is thought to favor a seller, as it can reduce transaction costs while locking in a serious buyer. In addition, a seller has the option to deny the right holder’s offer, with the opportunity to negotiate with other buyers. In the event that negotiations with other buyers are unsuccessful, the seller may come back to the rights holder to pursue a new offer.
The right of first refusal is the contractual right, but not obligation, to enter into a buy-sell transaction with the owner of an asset before any other third party. In commercial real estate, the right of first refusal allows an interested party to buy a property before the seller negotiates any other offer. In the scenario that the party with the right of refusal declines to buy, the seller is then free to negotiate and sell with other interested parties.
Measure of the return on an investment relative to the expected risk of that investment, over a specific period.
The minimum incremental yield by which the expected return on a risky asset must exceed the known return on a risk-free asset in order to
Defined as an evaluation of an individual or organization’s willingness to take risks, as well as the threats to which an organization is exposed. Risk profiles are important for determining which asset classes and allocations are appropriate for a portfolio. This risk profile signals the tolerable level of risk that is accepted. A corporation’s risk profile attempts to determine how a willingness to take risk will affect overall decision-making strategy.