REAL ESTATE FOR DUMMIES

  We have all come across the word "REAL ESTATE", in some or the other way. But we seldom wonder what all can real estate contain, of course, the main objective would revolve around buying, selling, or renting buildings, houses, condos triplex, etc. So to begin here are some key vocabulary words you need to understand to get started in the game!!!

1.  Real Estate

So not surprisingly the first term is real estate, so what does real estate really mean? real estate includes both the land and property which has been constructed. So in this, there are mainly 4 categories:

a) Residential property: This kind of property includes houses, apartments, condos, etc.

b) Commercial property: Under commercial property comes malls, offices, gas stations, etc.

c) Industrial property: As the name implies it includes facilities such as manufacturing industries, power plants, Data server centers such as of Google or Facebook.

d) Land: Vacant or Raw land which is purchased for future developments comes under this category. Investing in land is a popular long-term strategy. The land also includes farms, ranches, planned urban developments, etc.

2. Mortgage 

A mortgage or loan is the amount that you lend from your bank in order to purchase a property. The loan is later paid back to the bank with some percentage of interest, loans can range from anywhere to 15-20 years to now even to 40 years. But it all depends on which one you can opt for. In order to get a minimum amount of payback interest you need to have a good credit score and it's then you are able to get a good loan with minimum interest. Here, an additional note: remember typically people assume that taking a loan is a very bad thing and it can act as a jinx around your neck, but hey that's really not true. There are two types of debt: Good Debt and second Bad Debt, good debt is considered when you take a loan to build an asset which can pay almost all the loan by itself example: you purchase a house with a monthly payment of   $1000, but what you instead do is rent it out for about $1200, here there are two benefits one your tenant is paying your mortgage, two you are also getting additional of $200 of monthly cash flow. Now, what is bad debt? When you purchase a car that is way beyond your payroll by taking a loan here you may think that your car is an asset but in reality, it is a liability because it takes to cash out of your pocket not fill it, you have to pay its monthly installments, you have to maintain it, fill the fuel, etc. this is not considered as good debt because you are taking a loan to buy liability instead of an asset.

3. Down payment

This is a term related to the mortgage when you take some kind of loan you have to pay a certain amount of money in order to attain the loan this particular amount is known as a down payment. For example, you need a loan of $100,000 then you have to make a down payment of $5,000 in order to proceed further with your loan.

4. Equity

 Equity is the difference between what you owe on your mortgage and what your home is currently worth. to understand it better imagine that you purchase a house which is worth $200,000 using mortgage so now you pay a down payment of  10% which is $20,000 now you have a mortgage of $180,000 now you have an equity of $20,000 i.e $200,000 - $180,000= $20,000. Jump ahead for 2 years. You’ve been making your mortgage payments on time, and you might now owe $170,000 on your mortgage. Maybe your home’s value has jumped too during this time to $210,000. Jump ahead for 2 years. You’ve been making your mortgage payments on time, and you might now owe $170,000 on your mortgage. Maybe your home’s value has jumped too during this time to $210,000. You now have $40,000 in equity, or $210,000 minus $170,000.So this is known as Equity.

5. Cash flow 

The term cash flow is mainly used for rental properties. When your rental property generates a certain amount of rent then this is nothing but cash flow because here you don't have to work but instead, your money works for you. Not only in real estate but the term cash flow is used in other fields also for example: If you own a dropshipping store that has been well-established then even it generates a steady source of income which can also be referred to as Cash flow. 

6. Agent 

You all probably know that you require an agent in order to make all the processes which include purchasing or selling of a property and that's where an agent acts as a bridge. there are usually two agents involved during this process the one on the buyer's side also known as a Buyer's agent and the other as Seller agent. But it doesn't end here you will also require a mortgage officer to lend you a loan, a separate agent or organization who looks after your property if you rent your property.

7. Refinancing

If you wish another loan to fill your previous then this is called refinancing. This is usually to obtain lower interest on the new loan. This method is also used to buy multiple through Cash-Out Refinancing and also by using HELOC ( Home Equity Line Of Credit) through this you can use your equity to buy another property. 

8. Due Diligence

Before buying a home the buyer needs to inspect the property, the time which is given to do the inspection is known as Due Diligence.

9. Closing Cost

When a buyer buys a property there are often additional costs such as Title Insurance, Taxes, and various other fees. These costs are known as Closing Costs.

10. Assessed Value

A public assessor examines the property for tax purposes. A property management terminology “assessed value” gets used here for the overall property value provided by them.