Real Estate Investments Key Terms

Optimize results of real estate investments by understanding industry terminology

By Christine Foley

Real estate is a varied field that covers a lot of potential opportunities. To be involved in such an industry, it is highly recommended that individuals have a firm grasp on trade terminology, including key terms and concepts related to real estate investments.

Letter of intent

A letter of intent is a document used to express an individual or entity's intention to invest, develop or purchase an area or item, without actually creating any accompanying legal obligation to do so. These documents are most frequently utilized in order to negotiate the specifics and fine business points of a transaction and it occurs prior to the preparation of a formal and legally binding contract.
Try: A free sample letter of intent with respect to the real estate industry may be viewed at DocStoc.com. For information on how to write a letter of intent, visit WhiteSmoke.com.

Acquisition cost

The acquisition cost of a real estate investment represents the total amount of money needed in order to acquire an investment property. There are a number of specific fees which go into such a cost, including purchasing fees, legal fees, title and title insurance fees and due diligence costs.
Try: An informative article regarding the knowledge of a client's acquisition cost can be found at RealEstateSuccessPath.com.

Modern portfolio theory

The Modern Portfolio Theory, abbreviated with the acronym MPT, is an approach to viewing the risks and returns of a potential investment or portfolio of assets. This theory works to emphasize the overall range of opportunities presented by a group of assets, rather than individual assets. The Modern Portfolio Theory was originally developed in 1959, and presently is utilized in order to provide a foundation for investment diversification.
Try: An overview of the modern portfolio theory is illustrated at Investopedia.com.

Blind pool

A blind pool is an amassed amount of money that has been raised by either an investment manager, an adviser or a comparable professional. The money is raised to acquire an asset or more than one asset, which has yet to be officially or specifically identified.
Try: TheFreeDictionary.com offers a financial definition for the term blind pool with respect to investments.

Rate of return calculation

The rate of return calculation is most commonly used in order to make reference to the entirety of the rate of returns on various measures of return on a particular item, investment or piece of equity.
Try: For help understanding and determining the rate of return calculation, consider the information found at Invest-2Win.com and the calculator presented at Calcxml.com.

Capital improvements

Capital improvements are those investments made on a property in order to correct its deterioration. In many instances, it is utilized to prolong the life of the property or to add to its overall value.
Try: Capital improvement definitions and extended information can be found at FinWeb.com and NetGainRealEstate.com.