Real Estate Glossary I [Part 2]

CONTINUED-FROM

Continued from…

:point_right: Real Estate Glossary I [Part 1]

Industrial building

A structure built primarily for industrial and commercial purposes. A factory, assembly plant, warehouse, or other structure used for manufacturing and general business purposes.

Industrial development bond (IDB)

A bond issued by a municipal or state government to assist in the financing of an industrial plant or facility that will be leased to a private company.

Industrial district or park

A planned park-like complex that is intended to accommodate specialised industries. It is responsible for all public utilities, roadways, railroad sidings, and other infrastructure.

Industrial estate

A plot of land that has been subdivided for the purpose of industrial development.

Industrial gap

The gap between the need for and availability of industrial real estate in a particular market or region.

Industrial location decision-making

Site selection refers to the decision-making process in which potential sites for an industrial activity are researched and evaluated based on criteria such as their proximity to relevant resources and the level of competition in the market.

Industrial gap

The gap between the need for and availability of industrial real estate in a particular market or region.

Industrial location decision-making

Site selection refers to the decision-making process in which potential sites for an industrial activity are researched and evaluated based on criteria such as their proximity to relevant resources and the level of competition in the market.

Industrial park

A significant development over a vast region geared to the needs of business (such as water, roads, or landscaping)

A large area of land that has been made ready for a variety of light industrial and manufacturing jobs. Users can either buy or rent a site.

A business park is an area that is zoned for industrial use and has sites for many different businesses. It is developed and managed as a single unit, usually with common services for its users.

Usually, an industrial developer buys a large piece of land (usually between 400 and 500 acres), gets it zoned for industrial use, and builds roads, water and sewer systems, and other utilities. The developer then files a declaration of restrictions that sets up a property owners’ association and regulates things like setback lines, landscaping, architectural styles, and so on. The developer might sell a site to an industry that will build its own plant, or the developer might build the plant and rent it to the industry. When you buy a site in an industrial park, you can avoid the problems and costs that come with buying ready-made industrial property. You can also save money by sharing costs for sewers, security, utilities, and other things.

A designated area for industrial purposes.

A planned, park-like development that is designed to accommodate specific types of industry and includes all necessary amenities such as public utilities, streets, railroad sidings, water and sewerage facilities, and so on.

Industrial property

Warehouses and buildings that contain light manufacturing are included in this property categorization.

Real estate designated for industrial use, such as manufacturing or warehousing.

Industrial and manufacturing facilities and distribution centres are examples of commercial properties.

Zoned land suitable for the construction of factories, warehouses, and other industrial structures.

Industrial service area

The market segment that has enough qualified workers (or other resources) to sustain a particular type of manufacturing or other industrial endeavour.

Industry economies of scale

The development of an industry inside a community that results in unique resources and cost advantages for that business.

Inferential statistics

The process of forming conclusions based on evidence included in statistical data.

Inferior goods

Consumer items whose demand falls as buying power grows.

Infiltration

The gradual change of a neighbourhood as a result of people moving out or changing how the property is used. This is caused by changes in the economic, social, and physical forces in the area.

The movement of air from one place to another, as in the case of a draught coming from a crack, seam, or hole in a building.

Lead-Capital_Logo

Property Finance Made Easy

We specialise in Development funding | Commercial finance | Construction loans | Portfolio refinancing & Property investment loans in Australia.

:arrow_heading_down:

Click Here to strategise with Amber

Infiltration capacity

The rate at which a surface substance absorbs water; measured in inches or centimetres per minute or hour.

Inflation

A rise in prices across the board, resulting in a reduction in buying power.

Inflation guard

An add-on to an insurance policy that automatically increases coverage by a certain amount each quarter for the life of the policy, based on what the insured chooses.

Inflation risk

The possibility that overall inflation in the economy may be higher or lower than projected.

The possibility of real estate losses as a result of changes in nominal rates.

Inflow

Consumers who live outside the trade region spend money on retail.

Information search costs

The expense of gathering relevant market data. High information search costs have a negative impact on market efficiency.

Informed consent

Consent to a certain act granted following complete and fair disclosure of all facts required to make an informed decision. Only individuals with sufficient reasoning abilities who understand the ramifications and long-term consequences of an activity can provide informed consent.

Infrared film

Photographic film that can capture near-infrared radiation Gusts that extend beyond the visible spectrum to a wavelength of 0.9 micrometres) but are incapable of capturing thermal infrared wavelengths.

Infrared image

A picture captured within a wavelength range of approximately 0. 7 millimetres to an undefined upper border, which is sometimes fixed at 2.6 millimetres. Photographic infrared ranges from 0.7 to 2.6 millimetres, whereas thermal infrared ranges from 2.6 to 13.5 millimetres.

Infrared radiation

Longwave radiation with wavelengths between 3.0 and 4.0 and 100 micrometres is the most common, although near-infrared radiation with wavelengths between 0.7 and 3.0-4.0 micrometres is also present.

Infrastructure

A municipality’s services and facilities include roads, highways, water, sewerage, emergency services, parks and recreation, and so on. This service is also available on a private basis.

The physical infrastructure of a city, including streets, highways, sewage and drainage systems, and other public services, is required to house a large number of people.

Ingress

A way to get into a property. In contrast to egress.

An area that is used for both entering and exiting; the right to enter or leave.

Inheritance tax

A “death tax” is a fee that the state charges people who are going to inherit property. The tax is not put on the property itself. Instead, it is put on the heirs for their right to inherit the property. So, the rates or deductions may be different depending on how close the relationship is.

When a person dies, a statutory lien is usually put on all of the real property that person owned. This lien stays in place until the inheritance taxes are paid and a “tax clearance” is given. This is true even if the property was owned by two people with the right of the last person to own it.

Initial investment

The amount of money needed to purchase an investment.

Initial tax basis

A property’s tax basis at the time of acquisition. Cost + any further expenditures necessary to guarantee good and defensible title.

Initials

A short form of a name. Initials can work as a person’s signature as long as the person who signs them means for them to be the same as that person’s legal signature.

All parties to a contract should sign and date any changes to it. Most of the time, a notary must sign off on all changes made to a document. If they don’t, the document might not be accepted for recording. A safe way to sign a long document is for everyone to put their initials on each page. Some people do this on purpose.

In the more formal Torrens system of title registration, the recorder won’t usually accept a document for recording if the parties haven’t signed it with their full names; initials aren’t good enough. If an initial is the only part of a given name, or if a person doesn’t have a middle name, that should be written on the document. In the same way, the full name of the principal must usually be written on a power of attorney used to sign documents.

Injunction

A legal action in which a court issues a writ that either tells a defendant not to do something or forces the defendant to do something. With an injunction, the person to whom it is given is told to stop doing something, like breaking rules about pets in the deed or house rules. family apartment Look up granny flats.

Inner city

A neighbourhood that most people agree is the centre of a city’s residential or business life, even if it doesn’t have clear political, geographical, racial, or economic boundaries.

An older neighbourhood in a city near the core business sector.

Innocent misrepresentation

An unintentional misstatement of a material truth.

Innocent purchaser for value

One who buys real estate without being aware, either directly or indirectly, of any rights or interests that are more important than theirs. The purpose of state recording laws is to protect an innocent buyer from a previous buyer’s secret claims. Also known as a “true buyer for value.”

Input-output modeling

In economics, a mathematical model is a way to describe a local or national economy that explicitly accounts for the flows and links between different economic sectors. In order to analyze the direct and indirect effects of a change in a given sector or region, it is necessary to estimate sector- and region-specific multipliers, which take into account the fact that the output (products and services) of one sector may require the production inputs of other sectors.

Inquiry notice

Legal notice is what the law assumes when there are signs that would make a reasonable person want to find out more. For example, if someone is living in the property that is for sale, the buyer is expected to know everything that an inspection of the property would have shown. Buyers take title subject to the rights of the occupant.

INREV

The European Association for Non-Listed Real Estate Vehicles is a group of investors that invest in non-listed real estate vehicles.

Inside corner

Corner of a room where two walls meet to produce an internal angle.

Inside lot

Any lot between the front and back lots on a given block; inner lot.

Insider rights

The exclusive right to buy their flats for a limited time and usually at a discounted price are granted to tenants occupying a part of a building that is being converted into a coop or condo.

Inspection

An inspection of a certain location. Before signing the dotted line, a buyer should always check the property. An inspection is critical in determining if anybody else has a claim to the property, as possession of the property serves as constructive notice. Any encroachments or unregistered easements may also be discovered during an inspection. To ensure that any claims to prospective purchasers are accurate, a broker should conduct a thorough inspection of the advertised property.

The inclusion of a clause in the sales contract stating that all appliances, electrical fixtures, and plumbing fittings would be examined by the buyer before closing is common practice among real estate brokers. A few days before closing, the buyer is required to conduct this inspection. When an inspection condition is included in the contract, the escrow company will not close the transaction until it receives a letter from the buyer approving the inspection. Inspections are required by the FHA and VA prior to the acceptance of residential loans in order to verify that the buyer would not have to perform major repairs (such as wiring, roof, and the like) during the first year of ownership of the property. There are no inspection costs for purchasers, and sellers should know that they may have to make repairs before the VA approves their loan application.

Eases not recorded in the public records, building limitations, and improvements outside the declared lot borders may be found by a title insurance company’s inspector while preparing an owner policy for the property.

Residential landlords often have the authority to conduct inspections of leased properties provided proper notice has been given.

An examination of documentation or the physical features of a property.

Inspection period

A length of time during which a buyer examines the property and the documentation associated with a deal.

Inspector

Someone who does a thorough inspection of the property and gives a recommendation for repairs based on the findings.

Installment contract

A contract for the purchase of land.

Installment method gain

The difference between the gain on sale of a qualifying asset for installment method reporting and the recapture of accrued depreciation or cost recovery allowances. The installment approach can only be used to record this portion of the gain. The remaining must be recognised in the transaction’s taxable year.

Installment note

A promissory note that says the principal will be paid back in two or more exact amounts at different times.

YouTube-Subscribe-LD

:rotating_light: You are missing out if you haven’t yet subscribed to our YouTube channel.

Installment sale

A way to report income tax gain from the sale of real estate when the price of the sale is paid in installments (i.e., where at least one payment is to be received after the close of the taxable year in which the sale occurs). In an installment sale, you don’t have to pay anything up front. Section 453 of the Internal Revenue Code no longer says that you have to pay the principal in two installments (i.e., the buyer could make a down payment of prepaid interest only, and a balloon payment of principal in a later year). If the seller helps pay for the purchase, this is called an installment sale. Some or all of the price must be paid within one or more tax years after the sale.

If certain conditions are met, taxpayers can save money on taxes by waiting to get an installment and report it as income until a later year when their other income may be lower. So, a taxpayer doesn’t have to pay all of the tax on the gain in the year that it is sold. For any tax year, a gain from an installment sale is counted for principal payments received during that year in the same proportion as the gross profit from the sale to the total “contract price.”

In addition to the cash received, the sales price also includes the market value of any property or notes received from the buyer, as well as any existing mortgage on the property, whether it was taken over by the buyer or not. The year of sale is the seller’s tax year, and the date of sale is the date the property title is transferred or, if there is a contract for deed, the date the property is taken possession of. Note that the installment method of reporting is used automatically for qualifying sales of real estate, but the taxpayer can choose not to use it. This can be done by putting the whole gain on the taxpayer’s tax return for the year. Principal payments that were agreed to before the tax changes in 1997 are taxed at the lower rates that were put in place.

Money received in the year of sale includes option money (even if it was paid in a previous year), down payment, payment of seller’s debt, excess of mortgage over basis, and subsequent principal payments. Most of the time, payments in the year of sale do not include mortgages that the buyer takes on. But if the mortgage is more than what the seller paid for the property, the difference is treated as a payment in the year of sale. Note that the rule only counts money that was paid toward the purchase price of the property. Interest is always taxed because it is not considered a payment on the purchase price but rather a payment for the right to delay all or part of the purchase price payment.

Because the seller can wait to get all or most of the profit until the rest of the purchase price is paid, the seller can accept a small cash down payment, which makes the market of possible buyers bigger. This may also make it possible for the seller to ask for a higher price. Also, the seller only pays income tax on the part of each installment payment that is profit. Only the part of the principal that represents gain is taxed. The part that represents the return of capital invested (basis) is not taxed. So, the seller keeps more of each payment, which he or she can use to make more investments. Interest is, of course, taxed just like any other income.

In an installment sale, there are three steps to figure out how much tax you have to pay:

  1. Figure out how much of the transaction’s profit is taxable.

  2. Figure out the seller’s total proceeds from the sale (the money that will be paid directly to the seller). Do not include proceeds to others, like a loan assumption, in this figure ( often called the contract price)

  3. Figure out how much money you will make each year (the ratio of the total taxable gain to the total “contract price,” multiplied by the amount of cash received in that year)

For example, an investor sells a house for $135,000, takes a down payment of $40,500, and gives the buyer a purchase-money mortgage for $94,500, to be paid back over 20 years starting the next year. The investor makes a profit of $30,375 from the sale. So, the investor must count as a capital gain 22.5 percent of the down payment. This is the ratio between the $30,375 gain and the $135,000 contract price.

You can’t use the installment sale method to sell dealer real estate or personal property.

The profits of a sale are paid in installments over a certain length of time, allowing capital gains to be spread out over several years.

Purchase of a property in which a buyer pays the purchase price in instalments over time.

Installment sales contract

A contract that specifies the terms and conditions under which a seller is committed to provide conveyance deeds to the buyer at a later date. A land contract, contract for deed, or articles of agreement are other terms for the same thing.

Installment sales method

A technique of reporting sales to the IRS in which a part of the ensuing income tax burden is delayed if any of the funds from the sale are not received during the current taxable year.

Installments

Payments made on a debt on a regular basis.

Institutional lender

A financial institution, such as a bank, insurance business, savings and loan association, or any other lending institution whose loans are governed by law. In contrast to private lenders such as pension and trust funds or credit unions, which invest their own funds, such institutions invest depositors’ and customers’ money in mortgages. Mortgage brokers that operate as loan correspondents for out-of-state institutional lenders frequently represent institutional lenders. Because they are lending other people’s money, institutional lenders are strictly controlled by the government.

Institutional property

The same corporation owns and occupies an office building.

Institutional-grade real estate

Institutional investors, such as pension funds and international investors, prefer larger, more valuable commercial buildings worth more than $10 million. These investments are often concentrated in the 50 to 60 major metropolitan regions in the United States.

Instrument

A written legal contract that establishes the parties’ rights and duties.

A contract, deed, or will is a formal legal instrument. The phrase document is a broader term that refers to any paper that is used as the foundation, proof, or support for anything else. insulation Plasterboard, asbestos sheeting, compressed wood-wool, fiberboard, or other material put between inner and outer surfaces such as walls and ceilings to prevent heat loss. Air currents are broken up and dissipated by insulation.

Insulation

Any substance with a high heat transmission resistance that, when installed in a building’s walls, ceilings, or floors, reduces the flow rate of heat.

Non-conductive heat-resisting substance. It is applied to ceilings, floors, and walls in order to keep heat in the room.

A heat-resistant material that is put on the outside walls, the ceiling of the top floor, or the roof to stop heat or cold from getting in or out of the house. Also, the way a house is insulated.

Insulation board, rigid

Cane fibre or coarse-wood construction board in 12 and 25/32inch thickness. It’s available in a variety of sizes and densities, making it versatile.

Insulating glass

There is an air space between the two panes of glass in this window or door. Also referred to as a “dual glass.”

A door or window having a sealed air space between two panes of glass. Double-glazing is another name for this type of glass.

Insulation disclosure

The Federal Trade Commission has made it a rule that real estate agents, builders, and sellers of new houses must put information about the type, thickness, and R-value of the insulation in the house in the sales contract. In all listing and earnest money agreements, brokers also have to show the required facts.

Insurable interest

You have an insurable interest as soon as you sign a contract to buy a home, and it’s a good idea to cover it.

A right or interest in property that would result in monetary loss to the person who has that right or interest if the property were destroyed or damaged. As a result, an insurable interest would exist not just for the property owner or lessee, but also for any mortgagee or other lien creditors involved. To recover insurance policy damages, one must be able to demonstrate an insurable interest at the moment of loss.

Property that qualifies for insurance is referred to as “insurable interest.”

Insurable risk

The risk of loss from natural disasters such as fire, flood, and storm can be shifted to an insurance provider.

Insurable title

A title for which a title insurance company is willing to sell a policy.

A title that a title firm is willing to insure.

Insurable value

The monetary worth of the non-indestructible parts of a property.

Insurance

In exchange for a premium paid by the insured, one party promises to pay a sum of money to the other if the latter suffers a certain loss.

Compensation for losses caused by a specific risk or danger. There are many types of insurance to cover property or liability against different risks. Insurance can be written on buildings, their contents, and their equipment. It can also be written to cover things like loss of income due to damage or something else unexpected. You can also get insurance to cover your legal responsibility to other people. When a building is covered by an insurance policy, it is covered against certain risks, such as fire, explosion, and windstorm.

Property and liability insurance policies are personal contracts between an insurer and a specific insured. So, these policies don’t go with the land and can’t be given to someone else without the insurer’s permission. But if a loss happens, the right to the insurance money can be given to someone else.

When something is lost, the amount of the loss may be taken out of the policy. Then, you have to pay an extra premium to get the full amount of insurance back on the policy.

Most insurance policies have a clause called “pro rata liability,” which says that “the insurer is not responsible for a greater portion of any loss than the amount insured against bears to the total insurance carried on the property against the peril involved, whether collectible or not.” This keeps the owner from getting more money than what was actually lost if they have policies with more than one insurance company.

Public liability insurance covers the risk that a building owner takes on when the public is allowed to enter the building. A liability policy like this might pay for a person’s hospital bills and doctor’s bills if they were hurt in a building and said it was because the landlord didn’t take care of the stairs properly, which they said was their landlord’s fault. Most of the time, these policies are called owner’s, landlord’s, and tenant’s liability insurance.

There are two ways to figure out how much the claim is worth. One is based on the damaged property’s depreciated value, or actual cash value, and the other is based on the cost to replace it. If part of a building that is 30 years old gets broken, the wood and other materials are also 30 years old, so they are not as valuable as new materials. In order to figure out the actual cash value of the loss, the cost of new materials would be found and subtracted by an estimate of how much the item had lost value while it was in the building. The other way is to cover the cost of replacement. This would be the real amount a builder would charge at the time of the loss to fix the damaged property.

The rates for insurance are set by rating bureaus, which are overseen by the government. Under this system, the cost of the risk of possible damage is spread across all properties in the state. This is done by setting a premium rate for each risk based on how much damage it has caused in the past year (or several years). Underwriting bureaus change rates and keep them up-to-date based on the number of claims and the cost of fixing the damage.

If someone owned a $1 million building and thought it was in such good shape and was so well cared for and protected that it would be impossible to lose more than $100,000, they might buy a $100,000 policy. The building isn’t covered enough by insurance because its policy has something called a “coinsurance clause.” In the event of a loss, this clause says that the total amount of insurance on the building must equal a certain percentage of its value. If you don’t have enough insurance, the insurance company will pay out less on your claim. For instance, most commercial properties include an 80 percent coinsurance clause. When a loss happens, if the building owner has the right amount of insurance, the claim is paid in full up to the amount of the policy. The point of a coinsurance clause is to make sure that the insured has the right amount of insurance and pays the right amount of premium for this coverage.

Residential insurance policies also contain a coinsurance clause. For example, a house that would cost $100,000 to rebuild today would need to be insured for $80,000 in order to meet the 80% rule (note that some policies are increasing this percentage). All losses, whether total or partial, would be covered up to the face value of $80,000. But if the house is only insured for $40,000, it is only insured for half of the minimum amount. So, if the property loss is total, the homeowner would be paid up to the full face value. If the loss is only partial, the homeowner would be paid either the actual cash value (current replacement cost minus depreciation) or half the loss, whichever is greater. The idea is that the company will only pay out the amount of the loss that is equal to the amount of insurance carried. Even though the face value of the policy is $40,000, you might only get $14,000 back if the loss was $28,000 or less.

The three most common types of homeowner’s insurance are basic (HO-1), the homeowners (HO-3), and the condominium (HO-65). The HO-3 protects against many dangers, but not floods, earthquakes, or war. Flood insurance is always bought on its own.

To get hazard insurance, you must have an interest in the property that can be insured. With a contract for deed, both the seller and the buyer have an insurable interest in the property. Most contracts for deeds require the buyer to keep insurance up to a certain amount and pay the seller for any losses. If the sales contract says that the seller’s insurance policy will be given to the buyer and the cost will be split, the transfer should happen at the closing. The buyer then signs a form called an assignment of policy. This form won’t work until the insurance company or its authorized agent has accepted it.

Real estate brokerage firms should think about getting errors and omissions (E&O) insurance, which is similar to malpractice insurance for doctors. E&O insurance protects the broker if he or she is sued for lying about or hiding an important fact, whether on purpose or not.

A property manager is often in charge of getting the right insurance coverage for the properties they are in charge of. Some of the most common types of insurance coverage are standard fire, extended coverage and collateral fire, machinery and equipment, consequential loss, use and occupancy coverage, such as for business interruption and rental income, general liability insurance, and workers’ compensation insurance.

Property owners often pay for small damages themselves instead of filing a claim with their insurance company so that their rates don’t go up or they don’t lose their coverage. In any tax year, taxpayers can only deduct personal casualty losses that are more than 10% of their adjusted gross income. Few taxpayers can benefit because the amount of a casualty loss not covered by an individual’s insurance policy usually doesn’t exceed 10 percent of the person’s adjusted gross income.

A method of guaranteeing or indemnifying a person or company against loss caused by a specific hazard. For the payment of an agreed-upon premium, the insurer issues the insured a policy that provides financial protection for a specified period of time.

Insurance clause

Requires the borrower/mortgagor to have appropriate property casualty insurance, providing the lender shared authority over the use of the funds in the event of serious damage to the property.

Insurance coverage

The quantity of funds and form of insurance carried by a property.

Insured value

A structure’s insured value is its replacement cost, plus the cost of repairing or rebuilding it in the event of total destruction.

Intangible assets

Patents and copyrights are examples of nonphysical assets.

Intangible characteristics

Qualities that cannot be reduced to a numerical value but are still important to convey can do so in a more qualitative or abstract way.

CONTINUED-AT

Continued at…
:point_right: Real Estate Glossary I [Part 3]