Cheatography
https://cheatography.com
Notes on commercial and investment properties for NYS Real Estate exam
Investment Property Types
Office Building Classes |
Class A |
newer |
| |
Class B |
| |
Class C |
lowest condition |
| |
low-rise |
1-3 stories |
| |
mid-rise |
3-15 stories |
| |
high-rise |
>=20 stories |
Retail Property Types |
strip centers |
8000-30000 ft2 |
| |
neighborhood centers |
30,000-100,000 ft2 |
| |
outlet centers |
100,000-300,000 ft2 |
Office Building Classes are based on GAAP
Key Terminology
NOI |
equal to the gross income minus expenses (and sometimes debt service) |
Time Value of Money (TVM) |
the idea that money available at present time is worth more than the same amount in the future data due to its potential earning capacity |
leverage |
the use of borrowed capital (mortgage) to increase the potential return of an investment |
cash on cash return |
a percentage return on money invested in a property by an investor |
gross income |
the total amt collected from rents & other income producing opportunities |
debt service |
annual amt to be paid by a debtor on an obligation to repay borrowed money |
tax shelter |
any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities |
before tax cash flow |
the net profit/loss calculated by subtracting expenses from income before taxes are paid |
after tax cash flow |
the net profit/loss realized after taxes are deducted |
rate of return |
a profit on an investment over a period of time, expressed as a proportion of the original investment |
rentable square footage |
usable area that can be leased/rented to a tenant |
|
|
Lease Clause for Tenants
commencement date |
contracted date when activities begin |
move-in date |
the date at which the tenant will move in |
estoppel |
an instrument executed by the mortgagor setting forth the present status and the balance due on the mortgage as of the date of the execution |
lease escalation clause |
a contract provision allowing for one to pass an increase in costs to another party |
Pro Forma Statements
Pro-Forma statement |
an accounting statement that forecasts income and expenses for a period of time, typically 5 or more years |
1. |
Gross potential income |
2. |
effective gross income |
3. |
expenses |
4. |
net operating income (NOI) |
5. |
before tax cash flow |
Typically used by investors to estimate their rate of return for a particular property
-It often takes longer to find a new tenant for commercial building than a residential building
-Lenders will typically require the buyer to have capital reserves placed in an escrow account
SNDA
Subordination |
tenant subordinates lease to mortgage |
Non-Disturbance |
protects tenants from being thrown out of the property |
Attornment Agreement |
tenant commitment to allow for ownership to change |
|
|
Missed/Unsure Questions
|
How will the use of positive leverage benefit a real estate investor? it will allow him to purchase a larger building
|
|
How is a multi-family property valued different than an office building? both properties are valued the same way
|
|
What is considered a primary commercial property type? industrial properties
|
|
What is the term for usable area that can be leased/rented to a tenant? rentable square footage
|
|
What is the pricing on residential real estate based in part on? emotion
|
|
What is an important aspect of industrial warehouse space? ceiling heights
|
|
The amount of cash flow a property produces is used to determine the value of what property type? commercial
|
|
In addition to the cash needed for the down payment, what do you also need to run and maintain the property? liquidity
|
|
If an owner has enough cash to fund the operations of a commercial investment property while the cash flow becomes stabilized, what is he considered? liquid
|
|
What is a common management fee to assume for a large multi-family building? 5%
|
|
What type is largest in area? rentable square footage
|
|
In which type of lease does the tenant pay a fixed amt in rent, while landlord pays for building expenses? gross lease
|
|
Town Brokers have recently signed a lease to occupy an entire office building. What type of lease did Town Brokers most likely sign? NNN lease
|
|
In a typical commercial lease, who is given the option to extend a tenant's lease? tenant
|
|
How can a utility bill be passed through to the tenant if sub-metering proves unfeasible? rent inclusion
|
|
A non-recurring expense is considered what? capital expenditure
|
|
What are mortgage payments made up of? principal & interest
|
|
What do lenders typically have a buyer place in an escrow account? capital reserves
|
|
What is an underlying component of a cap rate? risk, sweat equity, cash
|
|
Which property is risky as an investment? duplex apartment house
|
|
Created By
Metadata
Favourited By
Comments
No comments yet. Add yours below!
Add a Comment
Related Cheat Sheets
More Cheat Sheets by khanlamisa