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NYS Real Estate Exam Flashcards > Chapter 16: Commercial & Investment Properties > Flashcards

Chapter 16: Commercial & Investment Properties Flashcards

1
Q

Equal to the Gross income minus expenses (and sometimes debt service). Also referred to as cash flow.

A

Net Operating Income

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2
Q

The percentage which is the sum of the discount rate, the effective tax rate and the recapture rate representing the relationship between net operating income and present value. Formula: Value = Income / Rate

A

Capitalization Rate

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3
Q

The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

A

Time Value of Money (TVM)

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4
Q

Which assumption does NOT apply to definition of market value?

A

Market value is the median price a property will bring

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5
Q

The approach to estimating value that is called “ the real estate market speaking through past sales because it uses actual sales transaction” is the

A

sales comparison approach

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6
Q

When more money is invested in a building than can reasonably be expected to be recaptured, it is called

A

Overimprovement

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7
Q

Loss of value for any reason is called

A

Depreciation

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8
Q

All these characteristics are required to create value except

A

Supply

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9
Q

The use or borrowed capital (mortgage) to increase the potential return of an investment.

A

Leverage

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10
Q

A percentage return on money invested in a property by an investor. Formula: Cash Flow / Down Payment.

A

Cash on Cash Return

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13
Q

The approach to value most likely to be relevant for appraising a community college is the

A

Cost-Depreciation Approach

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14
Q

The subject property has 200 less square feet of living area then a comparable. The market area value of 200 square feet is $20,000. Which adjustment should the appraiser make?

A

Subtract $20,000 from the comparable

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15
Q

The most relevant approach to estimating the value of a vacant lot in a residential neighborhood usually is the

A

Sales Comparison Approach

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16
Q

Which condition is considered external obsolescence?

A

A residential property’s proximity to an industrial area

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17
Q

Loss in value because of operational inadequacies, poor design, or changing taste is called

A

Functional Obsolescence

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18
Q

The total estimated time in years that an improvement can be profitably useful is called

A

Economic Life

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19
Q

A limited partnership wishes to purchase an apartment building that has a monthly net income of $4,000 and monthly expense of 1,000. If the partnership is to get a 12% return on its investment, what should it pay for the property?

A

$400,000

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20
Q

In the income approach , if the capitalization rate is increased and the net income is unchanged, the

A

Present value will be less

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21
Q

A home has 1,800 square feet of living area and 200 square feet of garage. The reproduction cost new is $48 per square foot for living area and $28 per square foot for finished garage area. The site measures 75 feet wide by 110 feet deep and is valued at $3 per square foot. The economic life of the home is estimated to be 50 years. The house is 10 years old. The value of the property using the cost-depreciation approach is

A

$98,350

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22
Q

An income- producing property has a potential annual gross income of $81,420. Vacancy and collection losses are estimated at 10% of potential gross income. Expenses are estimated at $40,000. The estimated value of the property is $250,000. The capitalization rate for this property is

A

13.31%

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23
Q

Effective gross income is

A

Potential gross income minus vacancy and collection losses

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24
Q

You are preparing a CMA for a single-family home that has a 2 car garage. You have located a comparable house that sold for $226,000, but it does not have a garage. If a 2 car garage is valued at $18,000, which adjustment would you make?

A

Add $18,000 to the comparable

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25
Q

A building is valued at $ 150,000 when NOI is capitalized at a rate of 8%. NOI is 40% of effective gross income. The effective gross income is

A

$30,000

26
Q

A commercial property has a potential gross income of $400,000. Vacancy and collection losses are 5% of PGI. Additional operating expenses total $12,920. The property has a first mortgage requiring payments of $1,070.75 per month. Using a capitalization rate of 12%, which amount is an accurate estimate of the property’s value?

A

$209,000

27
Q

Space that can be used or occupied by a tenant. Typically does not include elevators, stairs, mechanical spaces, etc.

A

Usable Square Footage

28
Q

The total amount collected from rents and other income producing opportunities (washing machines, storage, etc.).

A

Gross Income

29
Q

An accounting statement that forecasts income and expenses for a period of time, typically five or more years. Pro-forma statements are typically used by investors to estimate their rate of return for a particular property.

A

Pro-Forma Statement

30
Q

The percentage which is the sum of the discount rate, the effective tax rate and the recapture rate representing the relationship between net operating income and present value. Formula: Value = Income / Rate

A

Capitalization Rate

31
Q

Usable area that can be leased/rented to a tenant.

A

Rentable Square Footage

32
Q

Spaces in a commercial building shared by the tenants or residents of the building. Common areas include lobbies, corridors, stairs, elevators, etc.

A

Common Areas

33
Q

A lease that requires the tenant to pay, in addition to rent, some or all of the property expenses that normally would be paid by the property owner. These include expenses such as real estate taxes, insurance, maintenance, repairs, utilities, and other items.

A

Net Lease

34
Q

A lease of property whereby the lessor is to meet all property charges regularly incurred through ownership.

A

Gross Lease

35
Q

A lease of property in which the rental is based upon the percentage of the volume of sales made upon the leased premises, usually provides for minimal rental.

A

Percentage Lease

36
Q

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 of the certificate.

A

Estoppel

37
Q

Subordination
-Tenant subordinates lease to the mortgage.

Non-Disturbance
-Protects tenant from being thrown out of the property.

Attornment agreement
-Tenant commitment to allow for ownership to change.

A

SNDA Agreement

38
Q

A key tenant in retail. Typically one of the larger stores in a shopping mall, usually a department store or a major retail chain (Macys, Nordstrom, etc.).

A

Anchor Stores

39
Q

Annual amount to be paid by a debtor on an obligation to repay borrowed money.

A

Debt Service

40
Q

The net profit/loss calculated by subtracting expenses from income before taxes are paid.

A

Before Tax Cash Flow

41
Q

The net profit/loss realized after taxes are deducted.

A

After Tax Cash Flow

42
Q

A contract provision allowing for one to pass an increase in costs to another party. Escalation clauses are usually related to influences beyond both parties control, such as inflation.

A

Lease Escalation Clause

43
Q

Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.

A

Tax Shelter

44
Q

A profit on an investment over a period of time, expressed as a proportion of the original investment.

A

Rate of Return

45
Q

The order in which an investor (or accountant) organizes an income and expenses statement:

A
  1. Gross potential income
  2. effective gross income
  3. expenses
  4. net operating income
  5. before tax cash flow
46
Q

How will the use of positive leverage benefit a real estate investor…?

A

It will allow him to purchase a larger building

47
Q

How is a multi-family property valued different than an office building…?

A

Both property types are valued the same way

48
Q

Which of the following is considered a main commercial property type…?

A

Apartment buildings

49
Q

Which of the following is considered a primary commercial property type…?

A

Industrial properties

50
Q

Individual retail sites in a shopping center are referred to as what…?

A

Outparcel

51
Q

How much cash will an investor have to pay on a property where the bank is providing a loan at 75% LTV, on a purchase price of $4,750,000 with $350,000 in closing costs…?

A

$1,537,500

52
Q

Which of the following is the largest in area…?

A

Rentable Square Footage

53
Q

The monthly rent that each tenant pays in a multi-family building can be found in this document…?

A

Rent Roll

54
Q

What do lenders typically have a buyer place in an escrow account…?

A

Capital Reserves

55
Q

A higher cap rate will yield what…?

A

A lower price

56
Q

If the rent for a 10,250 sq.ft. office space is $42 per sq.ft., what is the annual rent for the space…?

A

430500

57
Q

If the rent on a 3,500 sq.ft. retail space is $68 per sq.ft., how much does the tenant pay on a monthly basis…?

A

19833

58
Q

XYZ Company recently signed a lease on 35,000 sq.ft. of office space at $41.50 per sq.ft.. What is the annual rent paid by XYZ Company…?

A

1452500

59
Q

City Brokers recently signed a lease on 22,000 sq.ft. of office space at $18.00 per sq.ft.. What is the annual rent paid by City Brokers…?

A

$396000

NYS Real Estate Exam Flashcards (23 decks)

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