Real Estate investing in general, if you’ve never done it, can be a little intimidating. Like any new endeavor, there can be a learning curve. One way to help yourself become more comfortable is to learn some basic investing terms and also some crowdfunding terms.
One term for new investors to know is the project exit strategy. An exit strategy is a contingency plan that is executed by an investor, trader, venture capitalist, or business owner to liquidate a position in a financial asset or dispose of tangible business assets once predetermined criteria for either has been met or exceeded.
A preferred return—simply called pref—describes the claim on profits given to preferred investors in a project. The preferred investors will be the first to receive returns up to a certain percentage. Preferred return is the order in which profits from a real estate project are distributed to investors. Preferred return indicates a contractual entitlement to distributions of profit.
Regulation Crowdfunding or Reg CF as it is also called enables eligible companies to offer & sell securities via crowdfunding. Reg CF transactions take place online via an SEC-registered intermediary (broker-dealer/funding portal). The max aggregate raise is $5 million in a 12 month period. Non-accredited investors are limited in how much they can invest across all crowdfunding offerings in a 12-month period.
Another term to know is Return on Equity (ROE). ROE is calculated by dividing net income by shareholders’ equity. Shareholders’ equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets. Equity is the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off in the case of liquidation.
These terms will help you better understand EquityDoor’s online offerings but also educate you about real estate investing in general.