CH - 17 RE Investments & Business Opportunity Brokerage Flashcards
Amount Realized =
Sale Price - Costs of Sale
Adjusted Basis =
Cost Basis +
Increases -
Decreases
Gain =
Amount Realized - Adjusted Basis
Liquid asset
can be sold rapidly w/ minimal loss of value
illiquid asset
not readily salable due to uncertainty
What is equity?
difference between current market value of a property, and the amount the owner still owes on the mortgage
CTO (Cash Throw-off)
aka
BTCF (Before and after tax cash flow)
After net operating income is estimated, debt service is subtracted to obtain CTO.
aka BTCF
Operating expense ratio =
Operating Expenses (OE) / Eff Gross Income (EGI)
LTV ratio =
Loan amount / Property value
Profit % =
Amount Made / Original Amount Paid
Rate of return (ROR)
Net operating income (NOI) / Investment value
Equity Dividend Ratio (EDR)
Cash throw off (CTO) / Original Equity
Depreciate over 27.5 yaers
Residential
Depreciate over 39 years
Non residential
Basic Accounting Formula
Assets - Liabilities =
Owner equity
Fixed expenses typically include
Real estate taxes and hazard insurance
What is correct regarding reserves for replacements?
They are a noncash expense used to replace short-lived components that wear out from time to time.
If an investor earns a lower rate of return on invested capital than the rate that is paid on borrowed funds, what type of leverage is indicated?
Negative
Which document indicates the financial condition of a business as of a particular time?
balance sheet
Under the Uniform Commercial Code, what is the document used to secure financing of personal property?
Security Agreement
