Glossary of Investment Terms
An alternative investment refers to any investment which does not qualify as “traditional”. Traditional investments are widely considered to be stocks, bonds and cash.
Active income is income earned as a direct result of a specific effort. In other words, input is correlated to output.
An accredited investor is a term used by the U.S. Securities and Exchange Commission (SEC) under Rule 501 of Regulation D.
A basis point (bps) is a unit that is equal to 1/100th of 1%, in other words one basis point is equal to 0.01%, similarly a 1% change is equal to a 100- basis point change.
Census tracts are typically small subdivisions of communities that are delineated for the purposes of the US Census.
Capital Gains Taxes
A capital gains tax is a tax applied to realized capital gains upon the sale of an asset, such as stocks or real estate.
A capital gain is any increase in value of an asset (such as stocks or real estate) that exceeds the purchase price. A capital gain is unrealized until the asset is sold.
Capitalization (Cap) Rate
The capitalization or cap rate measures a property’s yield in a one-year time frame, making it easy to compare one property’s cash flow to another on an equal basis – without considering any debt on the asset.
Payments made to investors periodically, typically over the course a calendar year, either from profits or interest payments.
Free Cash Flow (FCF)
Internal Rate of Return (IRR)
Jumpstart Our Business Startups (JOBS) Act
Loan-to-Value Ratio (LTV)
Loan-to-Cost Ratio (LTC)
Mezzanine Debt vs. Preferred Equity
Net Asset Value (NAV)
Net Operating Income (NOI)
Private Equity Fund
Typically, in a Preferred Equity investment, all cash flow or profits are paid back to the preferred investors (after all debt has been repaid) until they receive the agreed upon “preferred return.”