Terms Starting with #
24 terms
$25,000 Rental Loss Allowance
The $25,000 rental loss allowance is an IRS provision that lets non-real-estate-professional taxpayers deduct up to $25,000 of rental passive activity losses against their ordinary income — like W-2 wages or business income — as long as they actively participate in managing the rental and their modified adjusted gross income (MAGI) stays below $150,000.
1% Rule
Monthly rent should hit at least 1% of what you paid. That's the 1% rule. A $185,000 house? $1,850/month or more. Quick screen — not a full analysis.
1031 Exchange
A 1031 exchange (IRC Section 1031) lets you sell an investment property and defer capital gains and depreciation recapture by reinvesting the proceeds into a like-kind replacement property of equal or greater value, using a Qualified Intermediary to hold the funds.
1031 Exchange Advisor
A 1031 exchange advisor is a tax or real estate professional who helps investors structure and execute IRC Section 1031 tax-deferred exchanges — deferring capital gains taxes by reinvesting sale proceeds from an investment property into a like-kind replacement property.
1031 Exchange Deadline
The 1031 exchange deadline comprises two critical timeframes: 45 days from the sale of your relinquished property to identify replacement properties, and 180 days to close on those replacements — missing either deadline disqualifies the exchange and triggers full capital gains taxes.
1031 Exchange Rules
1031 exchange rules are the complete set of IRS requirements under IRC Section 1031 that must be satisfied for a real estate investor to defer capital gains taxes by exchanging one investment property for another like-kind property.
1031 Fatal Flaw
A 1031 fatal flaw is any procedural error, timeline violation, or structural mistake that disqualifies a like-kind exchange and triggers immediate taxation on the full capital gain — potentially costing tens of thousands of dollars.
2-of-5-Year Rule
The 2-of-5-year rule is the IRS residency test under Section 121 that lets you exclude up to $250,000 ($500,000 if married filing jointly) in capital gains from the sale of your primary residence — as long as you owned and lived in it for at least 2 of the 5 years before the sale.
200% Rule
The 200% Rule is one of three IRS-approved identification methods for a 1031 exchange. It permits an exchanger to identify any number of replacement properties, provided the total combined fair market value of all identified properties does not exceed 200% of the relinquished property's FMV at closing.
200-Percent Rule
The 200-percent rule is one of three IRS identification rules in a 1031 exchange that lets you identify any number of replacement properties — as long as their combined fair market value doesn't exceed 200% of the relinquished property's sale price.
203k Loan
A 203k loan is an FHA loan that finances both the purchase price and rehab costs in a single mortgage. You buy a fixer-upper and fund the renovation with one loan, one closing.
27.5-Year Depreciation
27.5-year depreciation is the IRS-mandated schedule for writing off the cost of residential rental property buildings over 27.5 years using the straight-line method under the MACRS system — giving you an annual non-cash tax deduction that reduces your taxable rental income without spending a dime.
39-Year Depreciation
39-year depreciation is the MACRS schedule for nonresidential (commercial) real property -- you deduct the building's cost basis evenly over 39 years using the straight-line method, significantly slower than the 27.5-year residential schedule.
4% Rule
The 4% rule is a retirement planning guideline stating that you can withdraw 4% of your investment portfolio in the first year of retirement, then adjust that dollar amount for inflation each subsequent year, and have a high probability of not exhausting your funds over a 30-year period. It emerged from the 1994 Trinity Study, which back-tested historical stock and bond returns to determine sustainable withdrawal rates. For investors pursuing the FIRE movement, it doubles as a savings target calculator: divide your expected annual expenses by 4% (or multiply by 25) to find the portfolio size needed to retire.
50% Rule
Half of gross rental income goes to operating expenses. That's the 50% rule. Taxes, insurance, maintenance, vacancy, management. Not the mortgage. Quick way to ballpark NOI and cash flow before you run real numbers.
506(b)
Rule 506(b) is a safe harbor under SEC Regulation D that allows issuers to raise an unlimited amount of capital from accredited investors plus up to 35 non-accredited but "sophisticated" investors — without registering the securities with the SEC. General solicitation and public advertising are strictly prohibited; all investors must have a pre-existing, substantive relationship with the sponsor before the offering is launched.
506(c)
Rule 506(c) is a private placement exemption under SEC Regulation D that allows sponsors to publicly advertise and generally solicit investors for a securities offering. In exchange for that marketing freedom, every investor must be accredited — and the issuer must take reasonable steps to verify that accreditation rather than simply accepting a self-certification.
70% Rule
The 70% rule is a fix-and-flip guideline: your maximum purchase price should not exceed 70% of ARV minus renovation costs, leaving room for profit and holding costs.
750-Hour Rule
The 750-hour rule is the IRS threshold for qualifying as a Real Estate Professional (REP) — a tax status that lets you deduct unlimited rental losses against your ordinary income (W-2, business, self-employment) by removing the passive activity loss limitations that normally cap rental deductions at $25,000 per year.
95% Rule (1031 Exchange)
The 95% rule is an IRS identification rule in a 1031 exchange that lets you identify unlimited replacement properties at any combined value — but requires you to acquire at least 95% of that aggregate fair market value.
95-Percent Rule
The 95-percent rule is the third and most aggressive of the three 1031 exchange property identification rules — part of the IRS framework that lets investors defer capital gains and property tax on appreciated real estate through 1031 exchanges. It lets you identify any number of replacement properties at any total value, but you must close on at least 95% of the aggregate fair market value of everything you identified — or the entire exchange fails and all capital gains become immediately taxable.
Advance Rate
The advance rate is the maximum percentage of a collateral asset's value that a lender will fund — the number that tells you exactly how much of your property's appraised value you can borrow against in asset-based lending.
Asset-Based Lending (ABL)
Asset-based lending is a financing method where the loan is secured by the value of the collateral — the property itself — rather than the borrower's income, credit score, or employment history, making it the primary path for investors who need to close fast or can't qualify for conventional mortgages.
Nominal Rate
The nominal rate is the stated interest rate on a loan or investment — the number printed on the term sheet — before adjusting for inflation. When a lender quotes you a 7% mortgage, that 7% is the nominal rate. It tells you the dollar cost of borrowing but says nothing about whether your purchasing power is actually rising or shrinking.