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
A type of equity participation loan where, in exchange for charging a below-market interest rate, the lender receives a predetermined percentage of a any increase in value of the property ...
The term’s abstract of title definition is the recorded summary of a property’s history. Abstracts of title can be used to determine former and present ownerships of any ...
Expenditures incurred building a structure, including material and labor. ...
That portion of a loan collaterized by a leased property extending beyond the expiration date of the lease. For example, a lending institution collaterizes a 20-year loan on a commercial ...
cash value or other consideration that can be received in a forced sale of real estate, such as that occurring in a foreclosure or when a company is going out of business. The liquidation ...
The meaning of a disclosure statement is a legal document signed by both parties, the lender and the borrower or buyer. This statement outlines the terms and conditions, the potential ...
A criminal act of falsely representing another individual to gain profit or gain an advantage. ...
income statement destroyed by a casualty such as a fire. This requires the reconstruction of the income statement based on source records, information, and documents. Income statement ...
An improvement to property that is below the standard, usual expectation. An example is when a contractor's work on a house is below the quality that the homeowner reasonably expected for ...
Have a question or comment?
We're here to help.