Broker Associate Flashcards
Balance sheet
A balance sheet shows the company’s financial position at a stated moment in time
Current ratio
the measure of the business’s ability to meet short-term obligations and is calculated by dividing the business’s current assets by its current liabilities
Tax Shelter
an investment that shields income from payment of income taxes.
Net Present Value
the present value of future cash flows (at a discount rate) minus the investor’s down payment
Internal Rate of Return
the discount rate at which present values of future cash flows equal the down payment
Quick Ratio Formula
Current Assets (minus inventory)
———————————————-
Current Liabilities
What are appraisals?
Opinions of value based on comparable properties
Appraisals are essential for determining the market value of real estate.
Define assemblage in real estate.
The combining of two or more adjacent properties
This process can increase the overall value of the combined properties.
What are Automated Valuation Models (AVMs)?
Data analyses that compile comparable data using a computer database of closed sales
AVMs use mathematical modeling to value properties.
What does ‘cost’ refer to in real estate?
The amount to produce or acquire something
Cost is a fundamental concept in determining property value.
What is the cost approach in property valuation?
Estimates value by taking cost minus depreciation plus site value
Based on the theory that a knowledgeable purchaser will pay no more than the cost of acquiring a similar site.
What is curable depreciation?
When a building component has been added or repaired and the owners can recoup their investment
This type of depreciation can often be fixed through renovations.
Define depreciation in the context of real estate.
Loss in value caused by wear and tear, poor design, or surroundings
It reflects the decrease in property value over time.
What is economic life or useful life?
The total estimated time in years that an improvement will contribute to property value
Understanding useful life helps in making investment decisions.
What is an indicator of a structure’s condition and utility?
Effective age
This term indicates how old a property is in terms of its physical state.
What does the Gross Income Multiplier (GIM) represent?
The ratio between a property’s gross annual income and its selling price
GIM can include income from sources other than rental income.
How is Gross Living Area (GLA) calculated?
By taking the exterior dimensions of a house and subtracting the garage square footage and any other non-heated square footage
This is relevant for broker candidates only.
What is the Gross Rent Multiplier (GRM)?
The ratio between a property’s gross monthly rental income and its selling price.
Define Highest and Best Use.
The most profitable legal way that a property can be used.
What does the Income Approach estimate?
The market value based on the present worth of future income from the subject property.
What is Incurable Depreciation?
Occurs when a building component has been added or repaired but the owners cannot recapture the added value.
What is Investment Value?
The value of a property to a particular investor based on the investor’s desired rate of return and risk tolerance.
How is Market Value defined?
The most probable price a property should bring in a competitive and open market.
What is Net Operating Income (NOI)?
The income remaining after subtracting all relevant operating expenses from Effective Gross Income (EGL).