Investing Flashcards
(26 cards)
Front (Question/Term)
Back (Definition/Answer)
What is real estate investing?
Purchase of property for income, appreciation, or both.
What is cash flow?
Net income from property after expenses.
What is appreciation?
Increase in property value over time.
What is leverage?
Using borrowed funds to increase investment potential.
What is equity?
Market value minus outstanding mortgage balance.
What is return on investment (ROI)?
Measure of profitability — gain from investment divided by cost.
What is risk vs. reward?
Higher returns often come with higher risk.
What is depreciation (investment)?
IRS-allowed deduction of property value over time for tax purposes.
What is tax shelter?
Income tax savings derived from allowable deductions.
What is capital gain?
Profit from sale of asset — taxed by IRS.
What is like-kind exchange (1031 Exchange)?
IRS provision allowing deferral of capital gains taxes on exchange of investment properties.
What is gross income?
Total income from property before expenses.
What is net operating income (NOI)?
Income after operating expenses, before debt service.
What is cap rate?
Rate of return used to estimate property value (NOI ÷ price).
What is debt service?
Loan payments (principal + interest).
What is cash-on-cash return?
Annual before-tax cash flow ÷ total cash invested.
What is syndication?
Group of investors pooling money for large real estate project.
What is real estate investment trust (REIT)?
Company owning/investing in income-producing property, traded like stock.
What is opportunity cost?
Potential benefit lost by choosing one investment over another.
What is gross rent multiplier (GRM)?
Property price ÷ gross monthly rent.
What is operating expense ratio?
Operating expenses ÷ gross income.
What is pro forma statement?
Projection of future income and expenses.
What is portfolio diversification?
Spreading investments to reduce risk.
