Real Estate Glossary I [Part 4]


Continued from…

:point_right: Real Estate Glossary I [Part 3]


Property that is being held for the purpose of sale or usage.

  1. A list of items with descriptions. Many real estate agents suggest that their clients add an inventory of the things that will be included in the sale of a house or condo to the sales contract. This makes it less likely that there will be confusion about which items in the seller’s home will be given to the buyer. Of course, an inventory should be part of the sale of a property that brings in money, like a building with furnished apartments, and the agent should check the inventory.

  2. A list of the goods that are in stock and ready to be sold in the normal course of business. Stock-goods sales profits are taxed the same way as other income.

The quantity available of a particular good, or a record of such a thing.

Inverse condemnation

A landowner’s claim to force a government to use eminent domain on the grounds that regulation has essentially seized the whole worth of a property.

A just compensation action launched by a person whose property has been effectively taken, significantly interfered with, or taken without just recompense. For example, if a governmental authority announces that it will condemn an owner’s property but then takes an unreasonable amount of time to take the property, the owner can file a lawsuit to demand a condemnation and payment for the taking. If the noise of low-flying government aircraft interferes with the owner’s use of the land, inverse condemnation, or a taking of property for which compensation must be paid, may occur. Another case in point is when some public works are carried out, causing damage to a private owner, but no condemnation action is taken by a public entity. Inverse condemnations are so-called because they are initiated by an owner seeking compensation from the condemning body, and the payment is for land that was not explicitly condemned.

Courts have ruled that zoning actions that simply reduce the market value of property do not constitute a compensable action on an inverse condemnation theory as long as a reasonably viable economic use exists. Before there has been an actual take or physical interference with the subject property, an inverse condemnation claim is not available.

Inverse condemnation is the inverse of eminent domain and happens when a public institution indirectly “condemns” private property by acting (e.g., through a restricted use rule such as downzoning) or neglecting to act when it should have, resulting in property loss or damage. The taking is accomplished by actions rather than legal action. It makes no difference whether the act or omission to act was negligent.


Putting off present needs in favour of future wants.


Commitment of money or other assets with the hope of gaining financial reward.

Any action that entails incurring considerable current expenditures in exchange for the right to gain future advantages. An investment of money or anything of value in exchange for uncertain income or profit.

Money invested in a property with the expectation of profit, assuming a reasonable degree of safety and ultimate recovery of principal; especially for long-term use rather than speculation.

Investment asset

An asset that a company owns but doesn’t need to run its business. Land and/or buildings that are owned to get rental income now or in the future, keep or increase the value of the property, or both. It isn’t kept to use in making or selling goods or services, for running the business, or for administrative purposes. It’s also not kept to sell in the normal course of business. 21 See also Surplus Asset and Operational Asset.

Investment contract

A contract, transaction, or scheme in which a person invests money in a shared venture and is lead to believe that profits will come purely from the promoter’s or a third party’s efforts.

The sale of real estate through investment contracts is considered the sale of a security, necessitating compliance with federal and state securities regulations.

Investment grade

Investments rated AAA, AA, A, and BBB that are appropriate for regulated institutional investors.

Investment interest

How much interest was paid to buy or keep an investment property. This doesn’t include interest paid on a personal home or an interest from a passive activity. Investment property includes anything that brings in money, like interest, dividends, annuities, or royalties. It also includes any trade or business in which the taxpayer doesn’t participate much, as long as it isn’t considered a passive activity. Investment interest can be deducted up to the amount of income from the investment. Any extra interest from investments is carried over to the next year.

Investment interest limitation

Internal Revenue Code provision that limits the amount of investment interest that may be deducted in a single taxable year on loans used to support investments.

Investment life cycle

The length of time that a property has been owned.

Investment property

As defined by the Internal Revenue Code, an asset is one that is held primarily for the purpose of obtaining an investment return, particularly capital appreciation, as opposed to one that is held for use in one’s trade or company. Real estate investment opportunities include raw land and built lots.

Property purchased for the purpose of generating current income and capital appreciation.

Rather than a primary dwelling, a piece of property that generates revenue or serves as an investment.

That type of real estate property in which a person would invest in order to earn a profit.

Investment return

the monthly (or annual) rate of return on an investment generated by rental and/or selling.

Investment risk

The likelihood that future cash flows or nonmonetary expenses and benefits will deviate from projected values.

Investment tax credit

A credit against income taxes generated as a result of investing in eligible assets.

A tax break depending on the cost and useful life of specific assets acquired.

Investment value

The current value of the stock position and the present value of the debt position added together. The present value of a stock holding is computed after taxes and takes into account the tax repercussions for a given investment.

The worth of a property to a certain investor, depending on his or her personal criteria, discount rate, expectations, and so on.

Value to a particular investor is determined by factors such as the investor’s needs, tax bracket, and financing options.

Investment value of equity

After-tax cash flow and after-tax equity reversion are valued using a discounted cash flow approach.

Investment yield

An investment’s growth in terms of money invested. Usually expressed as a percentage increase or return.

Investment-grade property

Large, relatively new, and completely leased commercial buildings in major metropolitan centres, often worth more than $10 million, and sought by institutional investors such as pension funds and international investors.


Any individual or company that invests in real estate to utilize in a trade or business or to generate money.

A person or a business that invests in a cash transaction.

Investor note financing

Investor promissory notes are financed.

Invisible improvement

Those land improvements that are not visible to the naked eye. They are general improvements to the land itself that are difficult to identify and assess because they have merged with the land, for example, cutting and filling, reclamations, timber treatment, and pest and noxious weed eradication.

Involuntary alienation

When a property’s title passes to the state because the owner dies without any heirs, the state takes ownership of the property as a result of a lien foreclosure auction, adverse possession, a bankruptcy petition, or a condemnation under the authority of eminent domain.

Involuntary conversion

A tax word that refers to the loss of property due to demolition or condemnation. A conversion of this type is deemed a “sale” and is taxable unless the revenues of the condemnation award or insurance payments are reinvested in similar property. If a property is condemned and the owner replaces it, the basis in the replacement property is the same as the basis in the condemned property, except that it is increased by any debt assumed above the amount of the condemnation award, and gain is recognised to the extent that the award exceeds the price paid for the replacement property. Section 1033 of the Internal Revenue Code requires that replacement property for commercial or investment property be purchased within two to four years of the end of the tax year in which there was a threat of condemnation, depending on the kind of property.

Involuntary lien

A statutory lien, such as a real estate tax lien, judgment lien, or mechanic’s lien.

A lien that is imposed on property without the owner’s consent.

Inwood tables

Before calculators and computers were common, appraisers often used a set of interest tables to figure out the present value of an annuity for a number of years at different interest rates. One of the many ways Inwood tables can be used is to figure out how much a leasehold interest is worth when the income stream (cash flow) stays the same. They are also called the “Inwood coefficients.”

The idea behind the system is that the present value of an annuity is not the sum of equal annual payments that will be made in the future. The annuity is only worth the amount that, if deposited today at a fixed rate of interest compounded annually, would allow one annual payment to be withdrawn at the end of the year.


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The Investment Property Databank is a database of investment properties.

Ironclad agreement

A deal that can’t be broken by the people who made it.

IRR of the differential

The rate of return calculated by subtracting the cash flows of one investment from those of another.


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that which is irreversible

Irrevocable consent

A contract that can’t be broken or changed. Most state licensing laws require a broker who doesn’t live in the state to sign a document saying that he or she will be bound by the outcome of any lawsuits brought against the broker.


A sprinkler system for the lawn.

Irrigation districts

Quasi-political districts established under special state statutes to supply water services to district property owners and given the authority to levy fees to fund district operations.


The Internal Revenue Service of the United States of America.

Isopleth map

A map made up of lines (isolines) that link locations with the same attribute value.


A party who has given permission for securities to be created and sold to investors.

Itemized deductions

Taxpayer expenditures mentioned in Internal Revenue Code Sections 161 through 1 95 that can be deducted from adjusted income to arrive at taxable income.