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10 Cards in this Set
- Front
- Back
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illiquid asset |
not readily saleable due to uncertainty about it's value or a lull in the market in which it is regularly traded. Property is considered and illiquid asset, which cannot be transferred as easily as other assets, such as stocks or bonds. |
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Leverage |
the use of borrowed funds to increase the potential return of an investment. When the rate of return exceeds the cost of borrowing, the leverage is said to be favorable or positive. |
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Advantages in investments in the real estate industry include: |
- IRS federal income tax deductions, allowances and credits |
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Unimproved Property |
Investment in unimproved or undeveloped property is probably the riskiest of all property investments, as it can be the most illiquid of all property types. Unimproved property is a long-term investment with a negative cash flow. |
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To Flip |
investor buys with intention to sell with or without reno, repairs or improvements.
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Operating expenses |
include fixed expenses, variable expenses and a reserve for replacements.
- Fixed Expenses (FE) include costs that do not change with the level of occupancy, such as real estate taxes and hazard insurance. |
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Real Estate Deductions & Exemptions |
The IRS allows certain real estate deductions & exemptions on an itemized income tax return. Taxes on non-income property are included as itemized deductions on Schedule A of the personal return. Property taxes can be deducted for any of the following: -Personal residence -2nd home -time-share property -vacant lot or land -Income property -Inherited property Mortgage Interest Deduction - allowed on qualified home namely the main or 2nd home |
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Amount realized |
Net proceeds from sale Amount Realized = Sale Price - Cost of Sale |
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Capital Loss |
A capital loss is the adjusted basis of the property that is more than the amount realized from the sale or exchange. An individual has a capital loss if they sell an asset for less than the purchase price. |
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Tax depreciation |
is a deduction that allows an investor to write off the cost of his or her investment in income-producing property over a prescribed period. Tax law currently allows the owners of residential and low-income investment properties to depreciate a portion of their investment over 27.5 years on a straight-line basis.
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