If you are willing to dive into the world of real estate or set out on your path as a real estate investor, it is crucial to have a strong knowledge base of key real estate terms. With this glossary, we will try to explore these terms and help you understand more about the sector.
What Real Estate Terms Should an Investor Know? Glossary
Understanding “Real Estate” and “Real Property”
Real estate refers to any property that is attached to the ground. This includes all assets such as houses, commercial premises, land, etc.
Within the sector, these properties are considered a valuable asset class that can be bought, sold or rented.
Real property, on the other hand, describes the right of a natural person or legal entity to use and enjoy real property.
The meaning of “mortgage loan” in the real estate sector
A mortgage loan is a type of credit that banks grant for the purchase or renovation of a property. It comes with an interest rate that must be repaid along with the amount of money initially borrowed. Understanding the role of mortgage loans and how to quote them is essential.
Importance of “appraisal” in real estate investment
A property appraisal is a professional evaluation to determine the market value of a property. It is a crucial step in obtaining a mortgage loan. Ensuring an accurate appraisal can help prevent over-leveraging.
How does the “Property Registry” work?
Property registration process
Property registration is a system that allows the owners of a property and the rights they have over it to be tracked. The process involves filing property documents with the registry, which are then verified and formally registered.
Value of a property registry in the real estate market
The value of a property registry cannot be underestimated. This registry serves as legal and public proof of the ownership of a property, provides legal security and facilitates property transactions.
What is a “real estate investment fund” and how does it benefit the investor?
Fundamental Aspects of the Investment Fund
Real estate investment trusts are collective investment vehicles that allow investors to own a stake in a diversified portfolio of properties. These funds may include tangible assets, such as apartment buildings and commercial premises, and are managed by an asset management company.
Investing in real estate funds versus direct ownership
Investing in real estate funds can offer numerous benefits compared to direct ownership. They offer not only diversification possibilities but also professional management, access to large projects and potential tax advantages.
Mutual funds and tangible asset allocation
Real estate investment trusts allow you to have exposure to a variety of tangible assets without the need to manage them directly. This asset allocation can help mitigate risks and generate consistent income.
How can a real estate investor benefit from “passive management”?
Definition and benefits of passive management in real estate investment
Passive management is an investment strategy in which the manager seeks to replicate the performance of a specific benchmark. This can help minimize costs, simplify investment decisions and potentially improve long-term returns.
Impact of passive management on asset allocation
Passive management can also influence asset allocation. It can allow for broader and more systematic diversification, help investors avoid short-term market fluctuations and provide consistent exposure to financial markets.
Passive management practices for real estate investors
In passive real estate asset management, real estate indices are typically used as the benchmark. By tracking these indices, investors can gain balanced exposure to various market characteristics, minimizing the need to manage assets directly.
What are the tax implications of “real estate asset transfers”?
When the property transfer tax is applied to real estate transactions
The Property Transfer Tax (ITP) is applied when the ownership of a property is transferred from one person to another. This tax, which is paid by the buyer, is one of the costs to be taken into account in any transaction.
Impact of the Property Transfer Tax
The impact of the ITP can be significant. The tax implications of these asset transfers can affect the overall profitability of the investment, so it is vital to understand how this tax is calculated and applied.
Asset transfers and their effect on investment profitability
Transfers of assets can have a significant effect on the profitability of investments. When transferring ownership of an asset through a sale, the costs of the transfer of assets must be taken into account and planned accordingly to ensure that the investment remains profitable after these expenses.
What does “quote” mean?
“Quoting” refers to the process of determining the selling price of a property. This value is based on many factors, including but not limited to, location, quality of construction, and market demand, among others.
What is “leverage”?
Leverage refers to the use of debt or borrowed capital to increase the potential return on an investment. It allows you to purchase more assets than you could afford with your capital.
What is meant by “financial assets”?
Financial assets are assets that have a tangible economic value, for example, a house, an office building or a plot of land. They are essential for market operations.
How does a “manager” contribute?
A property manager often carries out activities related to the purchase, sale and maintenance of properties. This professional can also advise on how to maximize the profitability of an investment.
What exactly does “subsidized housing” mean?
Officially protected housing (VPO) is a type of housing whose price, quality and access conditions are regulated by the public administration. These homes are intended for people who cannot access housing on the free market due to their economic income.
What is a “real estate developer”?
It is a company whose main activity is to promote the construction and sale of homes or properties. Usually, the developer buys a piece of land, develops a project and builds the homes to later sell them.
How does a “mortgage loan” work?
A mortgage loan is a loan offered by a financial institution to purchase a property. The property in question serves as collateral for the loan. In the event of default, the financial institution may take possession of the property.
What is meant by the “profitability” of an investment?
The profitability of an investment refers to the return on an investment made. It is measured as the relationship between the profit generated by the investment and the cost of the investment. This term is key for evaluating the performance of their investments.
What does it mean to have a “diversified portfolio”?
Having a diversified portfolio means investing in different types of real estate assets. This strategy reduces the risk associated with investing, as the performance of an investment does not depend on a single type of asset.
What is a “real estate agency” and how to benefit from it?
This is a company that acts as an intermediary between sellers and buyers. Investors can benefit from working with agents when searching for and purchasing properties as these agencies usually have a wide network of contacts and a deep knowledge of the market.
What does “real estate” mean?
“Real estate” refers to physical property such as buildings, land, and everything attached to them. It is used to denote the buying, selling, and renting of such properties for profit.
What does the term “investment-related” imply?
The term “investment-related” refers to all aspects involved in the investment process. This may include the purchase, sale, rental, management and calculation of profitability of properties.
What is a “community of owners”?
A “homeowners’ association” is a legal entity created when several people own different units of the same property. It is common in condominiums and apartment buildings.
How does the term “terms and conditions” apply?
The “terms and conditions” are the rules and guidelines agreed upon by the investor and the seller. They include details such as price, payment terms, maintenance obligations, and taxes, among others.
What is a “free investment” in real estate?
A “free investment” refers to an investment that is not subject to restrictions imposed by a regulatory authority. This means that the investor has complete freedom to decide which properties to buy, and when and how to invest.
How does the “municipal tax” affect?
The “municipal tax” is a levy applied to properties located within a municipality or city. This tax can affect the profitability of an investment, as it is a recurring cost that must be considered.
How to build a “diversified portfolio” in real estate?
A “diversified portfolio” in real estate is built by investing in different types of properties and/or locations. This can help reduce risk as not all of the capital is invested in just one type of property or location.
What are “different investment strategies”?
The “different investment strategies” in real estate can include investing in residential, commercial, industrial, rental, flipping, and other properties. The choice of strategy will depend on your goals, available capital, and the level of risk you are willing to take.
What is meant by “fulfilment of an obligation”?
“Fulfillment of an obligation” refers to the completion of everything that has been agreed upon in the contract, such as payment of the agreed price for the property, payment of taxes, and completion of necessary repairs, among others.
This glossary is just the beginning of the path to real estate investing. Educating, learning and understanding these terms are critical steps toward success in this industry.