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
Property deriving at least 75% of the income from personal residences. ...
Funds that are retained in an account until a certain event occurs. For example, a downpayment on a contract held until full payment is received whereupon the holding funds are credited to ...
Same as term closing: legal process of transferring a piece of real estate to a buyer. Typically it occurs in the office of the lender, attorney, or an escrow company. ...
When we think of rural property or rural real estate, most of us think of farms, properties with large areas designated to agricultural land. That’s how rural communities generally ...
A right or interest in property held by a third party, which often limits the use and diminishes the value of the property, but usually does not prevent the transferring of title. The more ...
What is reconciliation in real estate? Both aspiring appraisers and wannabe real estate agents know the definition of reconciliation in real estate. In appraisal, it refers to the process ...
Commonly, a covenant refers to a legal treaty or agreement between various parties. Explicitly, a stipulation comes into existence and is signed to confine particular financial transactions ...
Process determining an individual's financial ability to meet the terms of a loan. When selling real estate, the sales broker must qualify the buyer to make certain he/ she has the ...
Any gain or loss from selling of capital assets. The gain or loss is the difference between the net selling price and cost basis. The two types of capital gains or losses for tax purposes ...
Have a question or comment?
We're here to help.