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
Claim of a person or business to real property such as by exercising an option. ...
Insurance or maintenance policy taken out by a buyer of real or personal property. ...
Mortgage placed on a property after a previous mortgage. It can be a second, third, etc. mortgage. A junior mortgage is subordinate to the terms of a previous mortgage. Junior mortgages ...
An equity-to-value ratio is an excellent tool for those homebuyers that want to understand how profitable an investment is based on the amount of money invested and the actual value of the ...
group of at least two people or businesses combining to engage in a real estate project that would exceed their individual financial abilities. A syndication allows earning to be ...
Pipes from a structure to a sewer for the purpose of sewage disposal. ...
Layer of material put on the outside wall or foundation to prevent the intrusion of water or humidity into the structure. A moisture barrier is constructed out of plastic, aluminum foil, or ...
transfer of real property by legal means such as through inheritance. ...
Organizational governing group. Either an appointed or elected body overseeing the management of an organization and rendering advice on current issues. Members are legally responsible for ...
Have a question or comment?
We're here to help.