Glossary of Investment Terms
Alternative Investment
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
Active income is income earned as a direct result of a specific effort. In other words, input is correlated to output.
Appreciation
Amortization
Accredited Investor
An accredited investor is a term used by the U.S. Securities and Exchange Commission (SEC) under Rule 501 of Regulation D.
Basis Point
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.
Cost Basis
Census Tract
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.
Capital Gain
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.
Cash-on-Cash Return
Capital
Crowdfunding
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.
Common Equity
DRIP
Development
Distributions
Payments made to investors periodically, typically over the course a calendar year, either from profits or interest payments.
Debt
Equity
Free Cash Flow (FCF)
Hard Asset
Investment Property
Intrastate Crowdfunding
Internal Rate of Return (IRR)
Jumpstart Our Business Startups (JOBS) Act
Liquidity Premium
Liquidity
Linear Income
Loan-to-Value Ratio (LTV)
Loan-to-Cost Ratio (LTC)
Mezzanine Debt vs. Preferred Equity
Net Asset Value (NAV)
Net Operating Income (NOI)
Opportunity Zones
Passive Income
Private Equity Fund
Preferred Return
Pro-Forma
Preferred Equity
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.”