Understanding Real Estate Terms Part Two: M-Z

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Originally published on MatthewGorelik.io

Welcome to this month’s continuation of Understanding Real Estate Terms. We covered A-L in August with Part One. Now it’s time for Part Two!

Real Estate terms can be confusing, especially when you’re knee-deep in a process you are unsure of. Use this glossary any time you stumble across a term you don’t recognize!

Multiple Listing Services (MLS) – This is a special database available only to real estate agents and brokers. Industry professionals have the opportunity to submit listings and information to the database, effectively allowing them to search and compare listings beyond the scope of their own practice.

Points – The concept of points can be somewhat tricky. At it’s most basic, it is a fee paid to the lender in an effort to reduce the interest rate on your mortgage. The fee is equal to 1 percent of the total amount of the loan.

PITI  – An acronym that stands for Principle, Interest, Taxes, and Insurance. Together, these items make up the primary costs associated with most mortgage payments.

Preapproved – Preapproval is only obtained after a lender conducts an in-depth review of the borrower’s financial background. It is only obtained after completing a thorough application, paying the required fees for processing, and submitting any documentation requested by the lender. If the application is approved, the buyer receives a “conditional commitment” from the lender for a particular loan amount. It does not guarantee that the loan will be issued.

Prequalified  – Prequalification is the process of having a lender or specialist determine how much a particular buyer can afford to borrow. It is not an in-depth review and it does not guarantee that a loan will be granted. It merely serves as a starting point for the buyer to realistically assess property.

Private Mortgage Insurance (PMI) – This is a type of insurance for the lender. It serves to protect them in the event that the encounter a loss on the money they have lent (if a borrower defaults on their loan, for example). Lenders require this insurance be purchased on any conventional loan without a 20 percent down payment.

Rate Lock – An agreement between the lender and the borrower that states a specific interest rate and a predetermined length of time. The specified interest rate will be guaranteed for the indicated length of time, meaning it can not increase or decrease as market rates do.

Title Insurance – An insurance policy designed to pay out if the the property title defects or is subject to other title complications after the closing has been completed. Depending on the situation, it may be paid to the lender or the buyer.

Under Contract – Under Contract is a term given to any for-sale property that has accepted an offer, but not yet closed or met contingency requirements.

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WHAT IT WILL TAKE TO ATTRACT ANGEL INVESTORS

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First published on MatthewGorelik.co

Angel investors usually invest in innovative entrepreneurs and promising small startup companies. Although early investors in a startup company tend to be close friends and family members, professional and everyday investors are often willing to invest seed capital in promising companies that are likely to attract additional investment. Angel investors are a good source of one-time capital infusions to help launch or maintain the financial stability of a fledgling company.

Seed Capital

Angel investors typically take a long-term approach to investing by providing favorable interest rates on capital loans. This allows aspiring entrepreneurs to focus on the development of a product or service. Unlike traditional lenders and venture capitalists, angel investors focus on the future prospects of a startup company rather than existing income and assets. Angel investors focus on helping entrepreneurs succeed in exchange for an ownership stake, convertible debt or company equity. An angel investor may be identified by any of the following terms:

  • Informal investors
  • Angel funders
  • Private investors
  • Seed investors
  • Business angels

The angel investing concept actually began on Broadway. Wealthy patrons of the arts invested in promising theatrical productions. Now affluent angel investors employ a variety of financial vehicles to pool capital and inject money into innovative companies, including investment networks and online crowdfunding platforms. Angel investors are required to meet the Securities and Exchange Commission’s accreditation standards. SEC standards require a minimum annual income of $200,000 and a minimum net worth of $1 million to become an angel investor.

Angel Investing

Angel investing has accelerated in recent years. Widely publicized success stories such as Facebook, WhatsApp and Uber have propelled angel investing to unimagined heights.

Outsized Returns

Although angel investors may be hoping for outsized returns, most experienced angels are searching for entrepreneurial passion, dedication, concept quality, market opportunity, potential growth and personal integrity. Angel investors typically invest between $25,000 and $100,000. A clearly defined business plan and initial signs of success are important aspects of attracting angel investment capital. Intellectual property rights and the development of innovative technologies are especially attractive.

Angels are looking for a reasonable company valuation, favorable terms and the prospect of raising additional capital.

From the standpoint of an aspiring entrepreneur, raising capital is time-consuming and demanding. Angel investors are seeking answers to fundamental financial questions. The amount of capital to be raised, detailed financial projections and the anticipated monthly financial burn rate are only the beginning of what will be necessary to attract angel investors and the crucial seed capital that aspiring startup companies require.

What Happens To Real Estate After A Death

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First published on MatthewGorelik.io

Roughly one of every five United States households received a transfer of wealth facilitated by the death of a family member or – the second case is far less common than the former instance – friend via inheritance according to a study by the United States Bureau of Labor Statistics conducted from 1989 to 2007.

While everyone wishes they could receive an inheritance of any amount from a family member – or a complete stranger, for that matter – believing an inheritance will come one’s way following the death of a loved one is not sensible. As such, every reasonable member of society places immense value on the potential of being on the receiving end of an end-of-life wealth transfer.

How does an inheritance get passed on to an organization, person, or entity after death?

Legal documents called wills contain plans for distributing assets after all creditors are paid off in full. They contain tons of wisely-worded legalese mumbo-jumbo to make sure estate holders’ belongings are assuredly transferred to whomever or whatever those well-off testators – a legal term for the more commonly-used “benefactor,” or a person who gives cash money and other assets to people, organizations, or governments to help them – wanted to dole them out to.

This post doesn’t cover the steps of having a will made. However, any licensed estate-planning attorney can cover such legal protections to make sure assets are distributed precisely as testators want them to be handed out.

What happens if a will isn’t in place at the time of a prospective benefactor’s death?

In the United States, estates, defined by Investopedia as “everything comprising the net worth of an individual, including all land, possessions, and other assets that the individual owns or has a controlling interest in”, are split into chunks and distributed to heirs after any and all creditors are paid.

Single, childless testators’ estates are given to parents in full if they’re alive. Otherwise, such estates are given to siblings. These testators’ assets are split equally between one’s father’s and mother’s relatives. If they have kids, they are given to those kids and then grandchildren, if applicable.

Married, child-bearing testators’ belongings are distributed in whole to their current spouse. If these benefactors have kids with other spouses, half are distributed to those children, with the other half going to the current spouse.

Lastly, married benefactors’ estates, only if they are made up of “community property”, are given in whole to the recently-made widow or widower. They’re chunked out between parents, kids, and the surviving spouses if they’re “separate property.”

The 2017 iGlobal Private Equity Real Estate Summit

 

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iGlobal PE Real Estate Summit
Image: iglobalforum.com

An accomplished senior administrator with a wealth of experience in real estate financing, Matthew Josef Gorelik has served as founding chief executive officer and board chairman of Los Angeles’ Township Capital since 2014. Over the course of his career, Matthew J. Gorelik has participated in panel discussions at both the Los Angeles and New York City conferences of the iGlobal PE Real Estate Summit.

A provider of exclusive networking events for qualified senior administrative executives, iGlobal sponsors events that are attended by a range of elite business leaders. The 2017 iGlobal Private Equity Real Estate Summit took place in New York City and attracted more than 200 senior-level executives in real estate private equity fields. Event participants represented property owners and developers as well as various investment banks, mezzanine lenders, hedge funds, private debt firms, insurance companies, foundations, and endowments. Topics covered at the 2017 iGlobal Private Equity Real Estate Summit include the various effects of the recent national shift from low interest rates and minimal inflation to high rates of both interest and inflation.