Are you wanting to get into the real estate game but don't know any of the lingo? Parse through this plethora of lessons where you will learn the meaning and specific application of dozens of real estate terms taught by the incredibly successful Michael Burer.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Definition Magician: Basis: The total amount paid for a property, including equity capital and the amount of debt incurred. - Realtor.org
Lesson Nugget: Basis is the total combined amount of money that you have put into the property including improvements, loans, and investments.
CLAY CLARK: All right, we are here, we are joined with Michael "There-is-no-real-estate-topic-too-obscure" Burer. And we're talking about a topic that I know it's close to your heart, basis. And I'm excited about it. So I'm going to go and read the definition, and I'd like to get to kind of an ample example as far as what you think that my mind can handle about what this means.
So, here we go. Basis, the total amount paid for a property, including equity capital and the amount of debt incurred. What are you talking about?
MICHAEL BURER: So basis is simply the total amount you pay for the assets. So not how much money you put into the property. So say you buy something for $100,000, you put $20,000 in, you get an $80,000 loan. It's not the $20,000 and it's not the $80,000. It's all of that combined, all $100,000 is your total basis.
Then maybe once you own the property you do tenant improvements, you put another $10,000 into it, now your basis is $110,000. So the total cost of all the money that went into the property from whatever source is your basis.
CLAY CLARK: If you're a small business owner and you're trying to get a loan to buy a building, is somebody going to ask you, is somebody gonna ask you what basis is?
MICHAEL BURER: Well it'd probably come up when you are going to sell the asset. You can say, what is your basis? My basis is you know, $110,000. You can sell it for $130,000, OK I can generate a profit.
CLAY CLARK: OK.
MICHAEL BURER: I can get all my money out, repay my loan and make a profit.
CLAY CLARK: So they'll usually ask what your basis is, that's kind of the time where you would typically hear this term introduced.
MICHAEL BURER: Yes.
CLAY CLARK: OK. And Michael, I want you know this, and I-- last night I was trying to go to sleep and I'm like, should I go to sleep or should I come up with a great way to show you my appreciation. And I decided to come up with a great way to show my appreciation. So I wrote this little diddy for you. I appreciate you in the same way that the moon appreciates the Earth's gravitational pull.