Glossary

Valuation & Investment

35 terms in this category

Absorption Rate

Speed of selling or renting new properties in market, higher means active market, lower indicates slowdown, important for developers.

Amenities

Services and facilities surrounding property like schools, hospitals, markets, gas stations, increasing property value and appeal.

Appraisal

Process of estimating property value by certified expert for sale, mortgage, or insurance purposes, with detailed result report.

Buy and Hold

Strategy of buying property to hold long-term benefiting from value appreciation and rental returns, less risky than flipping.

Capitalization Rate (Cap Rate)

Ratio of annual net operating income to property value, indicator of expected return, higher means greater return but higher risk.

Certified Appraiser

Expert licensed by Saudi Authority for Accredited Valuers (Taqeem) to value real estate, reports accepted by banks and courts.

Comparative Market Analysis

Valuation method comparing property to similar recently sold ones, most common method for valuing residential properties in Saudi Arabia.

Cost Approach

Valuing property by calculating reconstruction cost minus depreciation, used for new or specialized properties hard to compare.

Diversification

Distributing investment across different types and locations to reduce risk, fundamental principle in successful real estate investment.

Down Payment

Cash amount paid at property purchase, typically 10-30% of value, rest financed by loan, larger reduces interest.

Equity

Property value minus any loans on it, representing owner's actual share, increasing with loan repayment and value appreciation.

Flipping

Strategy of buying property at low price, renovating or waiting for price rise, then selling at profit, requiring market expertise.

Income Approach

Valuing property based on its income generation capacity, used for investment properties like offices, shops, and rental residential buildings.

Infrastructure

Basic networks like roads, electricity, water, sewage, quality affecting property value, investment in it raises prices.

Investment Property

Property bought to achieve financial returns not for personal use, through rental or resale, with different tax treatment.

Land Investment

Buying land to benefit from value appreciation with urban development, long-term investment, requiring patience and illiquidity tolerance.

Liquidity

Ease of converting property to cash at fair price, real estate among less liquid assets compared to stocks and bonds.

Location Analysis

Evaluating property location regarding proximity to services, schools, main roads, location most important factor in real estate value.

Market Analysis

Studying area's supply, demand, and prices before investing, identifying opportunities and reducing risks, using current data.

Market Saturation

Market reaching state of supply exceeding demand, with prices and rental periods declining, signal for investors to be cautious.

Market Trends

Real estate market trends like price growth, new neighborhoods, consumer preferences, helping identify investment opportunities.

Market Value

Expected price to sell property in open market, determined based on comparisons and supply/demand, differs from book value.

Neighborhood Quality

Neighborhood level regarding safety, services, and infrastructure, directly affecting property value and rentability.

Opportunity Cost

What real estate investment misses from other opportunities, must be compared with alternative investment returns for sound decision.

Price Per Square Meter

Average property price per square meter, measure for comparing properties and areas, varying by location, type, and build quality.

Property Valuation

Determining market value of property using specific criteria, performed by certified appraiser, basis of buy/sell and financing decisions.

Real Estate Bubble

Abnormal price increases exceeding economic reality, followed by collapses, warned by analysts during severe speculation.

Real Estate Cycle

Real estate market fluctuations between boom and recession over time periods, understanding helps timing buy/sell decisions.

Real Estate Investment

Buying property aiming to achieve profits from rental or value appreciation, one of most important investment types, with relative stability.

Real Estate Leverage

Using financing to buy property larger than self-budget, amplifying profits and losses, common in real estate investment.

Real Estate Portfolio

Group of properties owned by investor, diversifying portfolio across property types reduces risk and improves returns.

REIT

Specialized real estate investment funds, offering shares to public, allowing investor to benefit from real estate without direct purchase.

Risk Management

Identifying and reducing risks associated with real estate investment, includes insurance, diversification, due diligence, protecting from losses.

Speculation

Buying property aiming to profit from short-term price increases without using it, increases market volatility and contributes to bubbles.

Supply and Demand

Two fundamental factors in determining real estate prices, increased demand raises prices, increased supply lowers them, balance occurs naturally.