Question 1

What is an Accredited Investor?

Accepted Answer

An individual or entity that meets specific financial criteria set by the SEC, allowing them to invest in private securities offerings. Generally, this requires an annual income exceeding $200,000 (or $300,000 jointly) or a net worth over $1 million excluding primary residence.

Question 2

What is a 1031 Exchange?

Accepted Answer

A tax-deferral strategy under IRC Section 1031 that allows investors to defer capital gains taxes by exchanging one investment property for another "like-kind" property. The exchange must be completed within specific timeframes: 45 days to identify replacement property and 180 days to close.

Question 3

What is Net Operating Income (NOI)?

Accepted Answer

Net Operating Income is the total revenue from a property minus all operating expenses, excluding debt service, income taxes, and capital expenditures. It is the fundamental metric used to value and compare income-producing real estate.

Question 4

What is a Cap Rate?

Accepted Answer

Capitalization Rate (Cap Rate) is a metric used to estimate the potential return on an investment property, calculated by dividing net operating income by the property's current market value. Lower cap rates generally indicate lower risk and higher property values.

Question 5

What is Cash-on-Cash Return?

Accepted Answer

A rate of return that calculates the cash income earned on the cash invested in a property, measuring the annual pre-tax cash flow relative to the total cash invested. It helps investors understand the yield on their actual capital contribution.

Question 6

What is Internal Rate of Return (IRR)?

Accepted Answer

A metric used to estimate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows equal to zero. IRR accounts for the time value of money and is commonly used to compare investment opportunities.

Question 7

What is a Syndication in real estate?

Accepted Answer

Syndication is the pooling of capital from multiple investors to acquire real estate, typically structured as an LLC or LP with a general partner managing the investment. It allows investors to access larger deals and professional management.

Question 8

What is a Preferred Return?

Accepted Answer

A threshold return that limited partners must receive before general partners can receive their share of profits, typically expressed as an annual percentage (e.g., 8%). It aligns GP and LP interests by ensuring LPs get paid first.

Question 9

What is Depreciation in real estate investing?

Accepted Answer

A non-cash tax deduction that reduces taxable income by accounting for the theoretical wear and tear of a property over time (27.5 years for residential, 39 years for commercial). It provides significant tax benefits to real estate investors.

Question 10

What is a Delaware Statutory Trust (DST)?

Accepted Answer

A legal entity that allows investors to own fractional interests in institutional-quality real estate, commonly used for 1031 exchanges. DSTs provide diversification and passive ownership while maintaining tax-deferred status.

Investor Learning Center

Net Operating Income (NOI)

NOI Growth Rate

CAGR (Compound Annual Growth Rate)

Capitalization Rate (Cap Rate)

NOI Margin

Occupancy Rate

Sharpe Ratio

Sortino Ratio

Beta

Alpha

Volatility (Standard Deviation)

Maximum Drawdown

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