Spectrus – Investment Real Estate Glossary – L
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- Lease
- A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and for a specified rent.
- Leverage
- The degree to which an investor or business is using borrowed money.
- Loan
- A sum of borrowed money (principal) that is generally repaid with interest.
- Loan-to-value (LTV) percentage
- The relationship between the principal balance of the mortgage (i.e. the loan) and the appraised value (or sales price if it is lower) of the property. For example, a home with a value of $100,000 and an $80,000 mortgage has a LTV percentage of 80 percent.
- Like-kind property
In a 1031 like-kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes. Examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes.* As used in IRC 1031(a), the words "like-kind" mean similar in nature or character, notwithstanding differences in grade or quality. One kind of class of property may not, under that section, be exchanged for property of a different kind or class. Examples of qualified 1031 like-kind properties and like-kind exchanges:
- apartment building for farm/ranch
- office building for hotel
- raw land for retail space
- unimproved property for commercial property
- airplane for airplane
Examples of non like-kind properties include primary residences, stocks and bonds, notes, partnership interests, developed lots held primarily for sale, and property to be resold immediately after initial purchase or completion of improvements.
* Qualification for Section 1031 exchanges depends upon the extent of personal use.
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