RE Finance Unit 14: Investment Financing Strategies Flashcards
Adjusted Book Basis
Purchase price of a property plus any capital improvements minus accrued depreciation, if any, to the date of the sale.
Capital Gains
Income earned from the sale of investments where the net sales price is less than the adjusted book basis.
Estate Tax
A tax imposed by federal and state agencies on the net value of a deceased’s estate.
Joint Venture
Realty ownership entity with automatic survivorship.
Kicker
A bonus paid to a lender as an enticement to make a below-market-interest rate loan.
Pyramiding
Method of acquiring additional properties through refinancing existing mortgages.
Realized Capital Gains
Investment profits not subject to income tax (e.g., profits from refinancing, exchanges, and installment sales).
Refinance
Replacing an existing mortgage; usually to gain a more favorable rate.
Recognized Capital Gain
Profits from the sale of investments and subject to income tax; derived by subtracting the adjusted book basis from the net proceeds of the sale.
Sale-Leaseback
Financing arrangement whereby an investor purchases real estate owned and used by a business corporation then leases the property back to the business; may include a buyback option
Sale-Leaseback-Buyback
Financing arrangement whereby an investor purchases real estate owned and used by a business corporation then leases the property back to the business; may include a buyback option
Split-Fee Financing
Type of equity participation in which the lender purchases the land, leases it to the developer, and finances the lease-hold improvements in return for a basic rental plus a percentage of the profits.
Tax-Free Gifts
Gifts free from any federal gift tax imposition.
