10.2 Property Flashcards
1
Q
Prime property will score highly on:
A
- Location
- Age and condition
- Quality of tenant
- Number of comparable properties
- Lease structure
- Size
2
Q
Running yield
A
- Indicates how much of the return is from income stream and not capital growth
= Rent income (net of management expenses)
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Cost of purchase (gross of all purchase costs
3
Q
Security
A
- Depends on quality of tenant
- May be in arrears + risk of voids
- Buildings can become obsolete
4
Q
Yield
A
- Less marketable and secure than index-linked bonds»_space;> higher ER
5
Q
Spread
A
Capital value can be volatile in long term
6
Q
Term
A
- Freehold: no term
- Leasehold: depends on tenant, but may be long term
7
Q
Expenses/exchange rate
A
High management costs
Leasehold: tenant responsible for building maintenance and insurance
8
Q
Marketability
A
Unmarketable due to:
- Large indivisible unit size
- Uniqueness
- Valuation
9
Q
Tax
A
- Capital gains and rental income (net of expenses)
10
Q
Disadvantages of direct property
A
- Size
- Need a lot of properties to have a well-diversified property portfolio
- Lack of marketability: time + costs
- Valuation: unknown until sale + high estimation costs
- Expertise needed
11
Q
Indirect property
A
- Pooled property funds
- Property company shares
- Listed REITs (Real Estate Investment Trusts)
