I.D.E.A.L.
Definition of "I.D.E.A.L."
An acronym stating the real estate is the I.D.E.A.L. investment. Each if the five letters in IDEAL stands for an advantage to real estate as an investment. "I" stands for interest deduction. The mortgage interest paid on the first and second residential homes are tax deductible. On the average, real estate is a good hedge against inflation because property value and the income from properties rise to keep pace with inflation. "D" stands for depreciation. The building on your land depreciates in book value each year and you can deduct this depreciation from your investment property and not residential. "E" is for equity buildup. This buildup of a capital asset is like money in the bank. As you amortize a mortgage, the value of your equity investment will steadily rise. In the case of income-producing property, this amortization could mean that your tenants help you build your estate. "A" is for appreciation. Your property value goes up every year, hopefully. Be careful because this is not guaranteed. "L" is for leverage. When you buy a house you make a down payment, say, 10% and you borrow the balance, say, 90%. You get the benefit of 100% even though you put up only 10% of your own money. You can maximize return with other people's money (OPM). The use of a mortgage and OPM means that you can use small amounts of cash to gain control of large investments and earn large returns on the cash invested.
Popular Real Estate Terms
Map showing the kinds of soil in a designated locality. ...
Contiguous shore area bordering a river that is subject to periodic water level increases. In the flood stage, the flood plain can be under water. ...
Welcome to the world of magical yet perplexing real estate! Undeniably, there's a lot to learn, but we're here to explain miscellaneous terminology so that you can make educated decisions. ...
Enumeration of the consideration given by each party to a contract which in some cases must be in written form to be enforceable. For example, the statute of frauds requires that all ...
Work required as a court judgment because of a crime committed. ...
An arm’s-length transaction is a business deal, or transaction where the seller and buyer act independently of each other without influence on the other party. What sets these types ...
Founded in 1934 and located in Garden, CA with 1993 membership of 9,000, the IRWA is a professional association of appraisers, property managers, title examiners, and others having interest ...
A building having one house hold on the first floor and a second household on the second floor. ...
Founded in 1947 and located in Washington, DC, the NAREB has 7,500 members with 15 regional groups and 6 state groups. It offers certification programs for members of the real estate ...
Have a question or comment?
We're here to help.