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
Interest rate on a mortgage is changed periodically based on the change in a general price index to take into account inflation, such as a yearly adjustment. An example is the consumer ...
In construction, a bracket or braced framework of triangulated bars, beams, and ties used for support in the construction of a roof. ...
(1) Judges remark in a court ruling not in and of itself embodying the law. A dictum merely illustrates or amplifies the ruling. (2) Arbitrator's ruling. ...
Power or strength of economic factors an variables influencing the real estate market. For example, real estate values may decline in times of recession because people cannot afford to buy ...
Also called demand note. A loan with no established maturity period, callable on demand by the lender for repayment. The interest on this type of loan is calculated on a daily basis and ...
Warranties issued by contractors, sellers, and real estate agencies that protect home buyers from specified defects in a house as per the contract. ...
Same as term financial institutions: Institutions acting as intermediaries between suppliers and users of money. The financial markets are where those wanting funds are matched with those ...
Use of borrowed funds to enhance expected returns. It is anticipated that the investment will earn a return exceeding the after-tax cost of borrowing. ...
Method of describing a real estate property offering by a developer in lieu of a prospectus. ...
Have a question or comment?
We're here to help.