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
Index Lease: A lease in which the rental amount adjusts accordingly to changes and/or movements in a price index, commonly the consumer price index.
Lesson Nugget: An index lease is an agreement in which the amount of future lease payments are calculated based on any inflation that does or does not occur.
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-All right Thrivers, my name is Clay Clark. I'm your host with the most on Thrive15.com, an alternative to lynda.com . The man with a plan. The most humble person you'll ever meet.
And I'm here off the coast of San Diego talking about index lease. Index lease with my main man, Michael. There is no real estate topic too obscure, beer.
I'm going to read the definition. He's going to provide an ample example that you and I can handle to explain to us what this means in layman's terms. Not lame man's terms. I Know you were thinking about that sort of thing, but here we go. Here we go.
A lease in which the rental amount adjusts accordingly to change and or movements in a price index, commonly the consumer price index. What are we talking about?
-So typically when you enter into a lease, say a five year lease, every year the rent is going to increase. Sometimes that would increase at say, $0.50 a square foot. Sometimes it may increase at a percentage, so maybe it increases at 3% per year.
Another way of doing it though would be based on an index, so usually an inflation index like the consumer price index. And so if that index goes up due to inflation, then your rent on an annual basis would increase.
-Is a consumer price index the same thing as the inflation index?
-Consumer price index is one way to measure inflation, the most common way to measure inflation.
-OK. And can you explain to the Thrivers out there who maybe aren't aware of what it means to devalue dollars and how inflation works, can you give us just a third grade level of what the word inflation means?
-Inflation means, basically, the money becoming worth less over time.
-That's a longer answer.
-I'm going to give you my understanding, and you tell me if I'm wrong.
-OK. Let's hear it.
-Government spends money they don't have, so they print money. And the more money they print, the less it's worth because there's more money.
-That certainly can cause a lot of inflation.
-OK. What's another reason that causes inflation.
-Just a perception that the money is worth less.
-OK. Helium can also cause inflation.
-That's something I just put in my notes here. I just thought about that for about an hour. Now hey, in all sincerity, I appreciate you very much for being here. And If your hairstyle exactly matched mine, that's the only way I could possibly appreciate you more. Thank you so much.
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