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
Same as term higher and best use: Use of a parcel of land that will produce the greatest current value. ...
Structure that has the same blue print and design as all the other homes in a given development; the opposite of custom built. ...
The right of a person or business to renew a contract. For example, the tenant may have the right to renew a lease for a specified amount and term. ...
An unpreventable, overwhelming, and irresistible force. It is common to place a force majeure clause in a construction contract to indemnify a construction deadline in the event an act of ...
Regularly, subsequent means something which occurs at a later date. In other words, a subsequent event follows a prior occurrence. For example, new circumstances arise after a contract is ...
Arrangement whereby a party providing financing gets a portion of the ownership. ...
Percentage of rentals estimated not to be made because of actual and anticipated vacancies. ...
Under a FHA-insured mortgage, both the property and the borrower must meet certain minimum standards. The borrower is charged an insurance fee of one-half percent on the unpaid balance and ...
Organization that manages the relocation of the employees of client companies from one area of the country to another. A relocation service will manage home sales and purchases in another ...
Have a question or comment?
We're here to help.