GlossARY oF TERM
A status for individuals meeting specific income or net worth criteria, allowing them to invest in private, unregistered securities like private funds.
Accredited Investor
A unit of measure equal to $0.01\%$ (one-hundredth of a percent). Used primarily to denote changes in interest rates or yields.
Basis Point (bp)
The net amount of cash moving into (inflow) and out of (outflow) a business or investment. Positive cash flow means more money is coming in than going out.
Cash Flow
An accounting method used for tax purposes that deducts the cost of a tangible asset over its useful life, accounting for wear and tear.
Depreciation
The value of an ownership interest in a company or asset. In real estate, it's the market value minus any liens or debt owed.
Equity
A person or organization that acts on behalf of another person, legally bound to put their client's interests ahead of their own.
Fiduciary
The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
Gross Domestic Product (GDP)
An alternative investment structure that pools funds from accredited investors, often employing complex strategies to achieve higher returns.
Hedge Fund
A metric used in finance to estimate the profitability of potential investments. It is the annual rate of growth an investment is expected to generate.
Internal Rate of Return (IRR)
A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task, such as a real estate development.
Joint Venture (JV)
A set of quantifiable measures that a company or individual uses to gauge its performance over time. In the context of investment, KPIs are crucial metrics used to evaluate the operational health and financial success of an asset or business.
Key Performance Indicator (KPI)
The use of borrowed capital (debt) to increase the potential returns of an investment. It magnifies both potential gains and losses.
Leverage
The ratio of an investment's expected returns to the capital invested. A metric often used in finance to quantify efficiency.
Multiplier
The total value of an individual's or company's assets minus their liabilities (debts).
Net Worth
An economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.
Opportunity Zone
Capital invested into companies that are not publicly traded (or delisted). It typically focuses on long-term value creation.
Private Equity (PE)
An investment vehicle that is organized as a corporation or partnership for the purpose of investing in Opportunity Zone property.
Qualified Opportunity Fund (QOF)
A company that owns, operates, or finances income-producing real estate. REITs must distribute at least $90\%$ of their taxable income to shareholders.
Real Estate Investment Trust (REIT)
The individual or entity responsible for finding, acquiring, and managing the investment property or deal, typically in a syndicated private placement.
Sponsor
Investment earnings that are not taxed until the money is withdrawn, allowing the capital to grow faster as taxes are delayed.
Tax-Deferred
The process of evaluating and assuming the risk of an investment or loan. In real estate, it involves analyzing the financial projections of a property.
Underwriting
The process of determining the current worth of an asset or a company, often using techniques like discounted cash flow analysis.
Valuation
A type of permanent life insurance that provides coverage for the policyholder’s entire life and includes a savings component (cash value) that grows over time.
Whole Life Insurance
The income returned on an investment, often expressed as a percentage of the amount invested.
Yield
A bond that does not pay periodic interest (coupons). Instead, the investor earns a return by buying the bond at a deep discount to its face value.