Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……A!
Your Appraisal is a document that will tell you how much your property is worth. The appraisal compares your property to others that have a similar number of bedrooms, comparable square footage and is located in close proximity to the property being appraised. The appraisal will assign a value to your property based on the final sale amounts of the comparable properties. The appraised value helps you determine how much potential equity may be in a property. Your equity would be the appraised value minus the amount you owe on the property. A percentage of that equity can be used to purchase more property or be deposited in your bank account.
The property itself is considered an Asset. An asset is anything that has value. The property has a value that over time will appreciate. This asset will increase your net worth, whereas the mortgage you place on the property is a debt. The value of the property minus the debt will be the amount added to your net worth.
The Asking Price for a property is the price the seller wants to receive in return for selling the property. Always keep in mind that this price is negotiable. When bidding on a property, the asking price is the highest number in the negotiation and your bid should be the lowest. The winning bid will fall somewhere in between.
After-Tax Income is the money that is left over after paying taxes on your yearly income. The income that you make during the course of the year is offset by the expenses that you incurred for that period of time. Included in those expenses is any depreciation that you may be entitled to. Your expenses are also known as your write-offs. You will claim your income on your tax returns and write-off any expenses to offset your taxable amount.
An Auction is simply a place you go to submit a bid on a property. At an auction, there are generally a number of homes that are being sold one right after another. The dates of these auctions are usually listed in the local newspapers or advertised through the media. Generally, auctions are good sources for deals on prospective properties.