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
Legal document that conveys real estate to the lender after the borrower defaults on his or her mortgage payments. The borrower should demand cancellation of the unpaid balance and a ...
Large room at the entrance to a building designed for people to converse or move about freely. ...
Person who will become the beneficiary if the original beneficiary dies before the insured. It is the policyholder's second election as beneficiary, dependent on the status of the primary ...
Appraisal by summation is an Alias for Replacement Cost A.K.A. Cost Approach, which is one of the approaches an Appraiser can go through in order to assign a Market Value to a ...
fee to use a bridge or tunnel. Fee assessed to use someone else's property. ...
Highly subjective term, usually an expression of monetary worth applied to a particular piece of real estate property. ...
One who agrees to pay the debts of another in the event that the debtor does not pay. The creditor can demand payment from the surety as soon as the debt becomes due. Although a surety ...
Judicial order prohibiting a person or business from doing something. The court may issue this dictate when unlawful conduct or activity is occurring. ...
Contractual agreement between a commercial or industrial rental property owner and an individual or firm who agrees to maintain the property. Management agreements specify the nature of ...
Have a question or comment?
We're here to help.