BOOk Chapter 1 Flashcards
what is a residential property?
single family houses
multi family apartments
types of multi-family homes
low-rise (less than 4 floors)+
mid-rise (4 to 10 floors)
high-rise (more than 10 floors)
true or false
condo owners are granted rice interest in their Real Estate
yeee
what are the types of commercial properties
office
retail
industrial
hotel
other
what are key factors when determining the value of an office
tenancy
location
quality level
what are the level of quality for an office
guest are graded A
wackiest are graded C
what does it mean for an office to be single-tenant?
there is only a single company in the office
what does it mean for an office to be multi-tenant?
there are different companies in the office
how are retail properties differentiated
by their format and size
what are the retail formats
malls
shopping centers
power centers
lifestyle centers
street retail
what are the size formats for retail
neighborhood
community
regional
super regional
what type of retail stores would Best Buy, Walmart, and Target be considered?
power centers
category killers
why are Best Buy, Walmart, and Target considered category killers?
their selection of merchandise
their agressive pricing
they kill competition
give examples of industrial commercial retail things
warehouses
manufacturing
assembly spaces
etc
how are hotels classified
location
intended use
level of service
how can a hotel brand be crucial?
it can strongly influence wether a customer stays or not
true or false
interests in real property are critical in determining value?
true
what is real property
land
structures affixed to that land
cannot be moved
types of interest in real property
fee interest
leasehold
fee interest**
not complete
subject only to the powers of big G
define don enclosed shape of the surface in which the owner can do what he pleases
leasehold
right to use a property for a discrete period of time
more limited than fee interested
why is the leasehold more limited than fee interest
at the end of the leasehold, the property reverts to original owner
types of restrictions put by the government
zoning
entitlements
eminent domain
easements
zoning
detailed map designating restrictions planned on the use of each piece of property under government’s jurisdiction
entitlements
right to improve your land as long as you respect the zoning and other government restrictions
eminent domain
government can buy your property for fair market price as long as they us the land for the overall good of society
easements
granting another party the right to access or transit its property in certain limited circumstances
what are the types of property ownership
direct ownership`
indirect ownership
direct ownership
investor owns the property (asset)
types of direct ownership
single proprietor
tenants in common
joint tenants with rights of survivorship
which form of ownership is the simplest form of property ownership
single proprietor
what are the key characteristics of a single proprietor
single individual is the direct owner of real property
makes all decisions for asset
controls finances and disposition
accepts all legal liability from ownership
when dead, property becomes estate and goes to heir
what are the key characteristics of tenants In common
ownership is held by a number of different individuals
each owner holds a percentage of interest in the property (including economic benefits and liabilities)
it can be used as individual owners' collateral for debt
owners reach agreement on decisions regarding operation, financing, and disposition
when dead, property becomes estate and goes to heir
what are the key characteristics of joint tenants with rights of survivorship
all tenants own 100% of the property, not just portions
when one dies, the other is considered the full owner
when both die, it becomes estate of the last tenant who died
what are key features in the indirect ownership that differentiate from the direct ownership
legal entities has intentions to own one or more properties
they own it directly but are not the ultimate owner
what are the types of legal entities
partnership
corporation
limited liability company
real Estate Investment Trust (REIT)
Real Estate Mortgage Investment Corporations
special purpose entities
special investment vehicles
why are partnerships created
to facilitate ownership of property by group of individuals
what are the key characteristics of a partnership
they have a partnership agreement
limited life entities dissolved after a specified period of time
liabilities and collateral extend beyond investments
interests are transferable personal property
tax pass through entities
can partnerships include limited partners?
ye bruv
what is specified in a partnership agreement
the rights and responsibilities of each partner
are the liabilities the same for one’s limited partners?
nah
limited partners’ liability is limited by own investment
can limited partners make as many decisions as an original partner?
nah boy
what does it mean for partnerships to be tax pass through entities?
no taxes are paid at entity level
profits, losses and capital gains are directly attributed to owner
what is a corporation?
legal entity granted unique rights and responsibilities by the state
in return, corporations have to pay corporate taxes
who owns corporations?
shareholders with no legal liabilities
how do corporations acquire money ?
by selling their services or products
borrowing
reinvesting profits
selling addition shares
what type of taxation are corporations subject to?
which taxes do they pay?
double taxation
net taxable income
taxes on capital gains
what is a limited liability company?
it shares the attributes of corporations and partnerships
owners are not personally liable for the company’s debts or liabilities
how are the owners of a limited liability company called?
members
what do members of a limited liability company do?
choose wether they are a proprietorship, partnership, or corporation for tax purposes
what are Real Estate Investment Trusts (REIT)?
publicly traded company that owns, operates or finances income-producing properties
organized as corporations
limited in their investments programs to real estate or mortgages
who controls Real Estate Investment Trusts (REIT)?
shareholders
what are necessary requirements for Real Estate Investment Trusts (REIT)?
must have at least 100 shareholders
no 5 shareholders can have at least 50% equity
must distribute 90% of taxable earnings and profits
are Real Estate Investment Trusts (REIT) public or private?
they can be either public or private
what are key characteristics of Real Estate Investment Trusts (REIT)?
unlimited-life
limited liability
shares are non assessable
non assessable shares
class of shares that do not allow the issuer to demand additional payment for the shares from stockholders
The majority of shares are currently non-assessable
Real Estate Mortgage Investment Corporation
entity that facilitates investments in mortgages and mortgage-backed securities
special-purpose entities
generally established to hold single properties and isolate them from claims involving the owner’s other assets
why are special-purpose entities often called bankruptcy remote entities?
makes various investors isolate each one of their legal entities
special investment vehicles?
created to hold portfolios of mortgages backed securities
what is the goal of people using special investment vehicles?
own high-yield, long term assets
how do special investment vehicles achieve their clients’ goals?
funding them with lower cost, short term paper
what are the functions of Real Estate
- development
- construction
3 . property management
- leasing
- property brokerage
- asset management
- portfolio management
why is Real Estate development a multiyear process?
you have to choose the site
identify and conceptualize purpose of the property
see how the property will serve its purpose
gotta secure government approvals
does why is Real Estate development need project management services?
yes for planning and construction
what are the steps in the construction of Real Restate?
starts when the site is ready to accommodate the building
you build the accompanying stuff like parkings
finishes when the government gives certificate of occupancy
what si property management?
day-to-day operation of a property
making sure rents legit and that the house remains gyu in general
what do leasing professionals do?
identify prospect tenants and help them find a property to rent
what do leasing brokers do?
they help landlords identify tenants
captive brokers
represent multiple properties held by a single landlord
they direct tenants to one of the landlord’s multiple properties
independent brokerage firms
represent a variety of properties held by many landlords
they wish to have commissions in exchange
what is property brokerage’
involves the sale of properties
what do brokers do?
create liquidity in the market matching sellers and buyers
how do brokers create liquidity
identify optimal buyers
can tell the target price
can estimate in how much tome the property will be sold
why is the term “buyer’s broker” becoming increasingly common?
usually brokers represent sellers, but now the opposite becoming even more common
what do asset managers do?
develop and implement plans to maximize the value of a property
what exactly do the asset managers do to maximize property value?
evaluate asset against tenants demand
determining if the property meets market needs
sometimes gotta do reposition plan
analysis of ongoing property maintenance and expenditures
review asset against market to see when to sell it
when would asset managers need to do a reposition plan?
if the asset needs to be altered to meet the market’s needs and demands
what do portfolio managers do?
buy and sell assets that match the requirements of investor
do Real Estate portfolio managers work on a single property or multiple properties
they can do either one of them
they would choose the latter if they wish to create a diversified portfolio
what are the types of Real Estate companies?
operating companies
service companies
construction companies
what is the most common form of Real Estate company and which part of the larger bracket of companies is it a part of?
the Developer/Owner/Manager companies
part of the operating companies
which companies are part of the Real Estate service companies
Real Estate Brokerage firms
leasing firms
property management firms
Diversified Real Estate service companies
what do Developer/Owner/Manager companies do?
create or acquire Real Estate to own it and manage it
what do Real Estate Brokerage firms do?
employ brokers who work with both buyers and sellers of assets
what do leasing firms do?
they employ brokers who work with landlords
they wish to identify potential tenants
they can also work for tenants
what do property management firms do?
provide outsourced management and administrative services to Real Estate owners
what do Diversified Real Estate service companies do ?
provide multiple Real estate services under one organization which proves beneficial to landlords
how are property managers paid?
on a monthly basis with a percentage of the property revenues
how do small landlords with Diversified Real Estate service companies?
scale and outsourcing of a large Diversified firm
how do small landlords with Diversified Real Estate service companies?
scale and outsourcing of a large Diversified service firm
what do large landlords tend to do regarding Diversified Real Estate service companies?
they tend to create their won service organizations
what do construction companies do?
employ various contractors with different specialities to plan and implement the construction of property
what are the types of ownership of Real Estate companies
private owners
syndications
public shareholders
private owners
entities that could source enough capital to construct major projects
were dominant up until the 20th century
how did syndications own real estate companies?
raised quite through groups of unrelated investors (syndicates)
what are syndicates?
limited partnerships with a syndicator (sponsor)
what do syndicates do?
serve as partner providing real estate services to their partnership for fee income
what do syndications wish to do regarding taxes?
creation of tax-sheltered income
are syndication still gyu?
nah, out of favor since 1986
what companies form part of the Public Real Estate companies?
Real Estate Investment Trusts (REITs)
Real Estate operating companies
what companies form part of the Public Real Estate companies?
Real Estate Investment Trusts (REITs)
Real Estate operating companies
Public Real Estate companies?
REIT
companies that could aggregate property on behalf of the shareholders
tax benefits are almost equivalent to those of a partnership
small investor can now invest in large commercial properties
Public Real Estate companies
REIT
companies that could aggregate property on behalf of the shareholders
tax benefits are almost equivalent to those of a partnership
small investor can now invest in large commercial properties
Public Real Estate companies
Real estate Operating companies
public companies that invest in real estate without using the REIT structure
tax efficient
zero REIT constraint
who are OTHER important Real Estate industry participants?
banks
professional services
accounting services
appraisers
insurance brokers
architecture
surveyors
engineering
why are banks one of the most important players?
because of the capital they provide in the industry
what are the types of banks?
commercial banks
Investment banks
mortgage banks
what do commercial banks do?
aggregate funds from depositors
provide transaction processing services to corporate and individual clients
why are commercial banks an attractive place to deposit capital?
can deposit accounts insured by the Federal Deposit Insurance Company
what do investment banks do?
link investors to public and private capital markets
link investors to mutual funds
give tips to investors on diversification and long-term goals
give tips to corporations to access capital markets and corporate financial strategy
very active in underwriting mortgages
how do investment banks raise capital?
get capital from investors interested in higher¡er returns and greater risk
what do mortgage banks do?
specialize in underwriting mortgages on major commercial properties
how do mortgage banks fund the mortgages they underwrite?
by placing them with financial institutions
these include:
- commercial and investment banks
- insurance companies
- pension funds
what is included in real estate professional services?
legal services
what are real estate legal services? who do it?
transactions structured in which real estate is acquired, developed, leased, and sold
also help structure entities that own assets and relationship between entities and investors
lawyers
why is accounting important in real estate?
many transactions needed because of the many agreements
they turn into financial statements by a accountants
what do appraisers do?
want to provide objective estimate of asset value
who uses appraisers?
investors and capital providers
what do insurance brokers do?
work with real estate owners to source and implement risk management solutions
they protect their property against economic losses
what is property and liability insurance?
insures property owners against losses from property damage resulting from natural and manmade disasters
covers property owners from claims brought by those who are accidentally injured at or on the property
what are the types of real estate insurances that insurance brokers in the real estate industry work at?
property and liability insurance
title insurance
personal lines insurers
title insurance
protects property owners against claims by prior owners
allows for efficient title transfer
personal line insurers
provide health, disability, and life insurance to workers in the real estate industry
what do architects do?
design buildings for its purpose on the site chosen
what do surveyors do?
identify land parcels from maps and their written description
create physical markers on property
how do surveyors create physical markers on property?
by observing landmarks and measuring the land
what are engineers?
applied scientists who use knowledge from different scientific disciplines to solve real-world problems
types of engineers in real estate
civil engineers
environmental engineers
mechanical engineers
civil engineers
focus on issues in the build environment
specialized civil engineers focus on the creation of public infrastructure such as utility systems and transportation systems
environmental engineers
work tu assure built environment does not damage natural environment
work to Identify existing environmental damage
propose plans to extract or content contaminants to make land gyu for reuse
mechanical engineers
produce technical plans for design and construction of buildings
what are the types of mechanical engineers (specialized engineers) in the real estate industry
structural engineers
electrical system engineers
HVAC engineers (heating, ventilation, and AC)
vertical transportation engineers
