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New York Real Estate > Chapter 17 Commercial And Investment Real Estate > Flashcards

Chapter 17 Commercial And Investment Real Estate Flashcards

1
Q

What is Investment?

A

The outlay of money for income or profit.

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2
Q

What are some objectives of investment property ownership?

A
  • a hedge against an inflationary economic trend
  • for the tax savings generated by passive losses or depreciation deductions for income properties
  • as a long term low risk investment
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3
Q

What is the rate of return?

A

Net operating income to the investment.

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4
Q

What is Time Value of money?

A

A process that calculates the value of an asset in the past,present, or future. It is based on the idea that the original investment or principal increases in value over a certain time.

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5
Q

Is real estate liquid?

A

No, and it cannot be transferred.

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6
Q

What is Leverage?

A

The use of borrowed funds.

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7
Q

Retail centers differ in size and fall into several categories what are they?

A
  • Strip mall centers
  • Neighborhood centers
  • Outlet centers
  • shopping malls
  • specialty centers
  • Regional malls
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8
Q

Explain strip mall centers?

A

Typically 8,000-30,000 square feet
May be anchored by convenience store
May include a doctors office, beauty parlor, restaurant or cleaners

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9
Q

Explain Neighborhood centers ?

A

30,000 to 100,000 square feet and are anchored by supermarket

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10
Q

Explain Outlet centers ?

A

100,000- 300,000 square feet or more my be anchored by one or two large discount department stores

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11
Q

Explain Specialty centers ?

A

Typicality tourist attractions such as board walks and attracts business from outside the immediate community

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12
Q

Explain Regional malls?

A

May contain large anchor tenants such as Walmart , super market , clothing and furniture stores.

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13
Q

What is a commonly used long term lease for commercial property?

A

A Ground lease.

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14
Q

What is a Ground Lease?

A

A type of long term lease commonly used for commercial property of unimproved land usually for construction purposes.

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15
Q

What is gross income ?

A

Income received without deducting expenses.

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16
Q

Before deducting operating expenses what is deducted?

A

Losses from vacancies and credit losses are deducted from potential income (gross schedule rental income).

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17
Q

What are mortgage principal and interest payments called?

A

Debt service

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18
Q

What is a Pro Forma Statement?

A

Estimate

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19
Q

The Pro Forma Statement is adjusted to what?

A

Reflect a potential change in income and expense based on the investors knowledge of real estate market.

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20
Q

What does the cash flow represent ?

A

The net proceeds or cash remaining after all expenses and debt services are paid.

21
Q

When is the before tax cash flow measured?

A

Before income tax are considered

22
Q

What is a cash ok cash return ?

A

The ratio of annual before tax cash flow to the total amount of cash invested, expressed as a percentage.

23
Q

What is a after tax cash flow?

A

The profit from incoming-producing property less income taxes if any attributable to the property’s income

24
Q

What is a tax shelter?

A

A paper loss.

25
Q

What is a Capitalization rate?

A

The annual return that an investor expects to receive. It is the primary method to estimate the present value of income producing properties.

26
Q

What is rentable square footage?

A

The square footage of the total area which cannot be used or sometimes see but the property owner charges rent for the space anyway. Rentable square footage equals the entire space including the usable square footage and the tenants pro rata share of the buildings common areas such as the lobby hallways and restrooms.

27
Q

What is Carpetable area?

A

The space that is covered by carpet or flooring and walked upon within the interior wall of the space.

28
Q

What is the Effective rent?

A

The tenants cost per square foot after all concessions are considered.

29
Q

How does a property owner view the difference between the rentable and usable area is a commercial space as?

A

A loss factor.

30
Q

What do common areas include ?

A

The lobby, elevators, corridors,restrooms,and utility closets.

31
Q

What is Common Area Maintenance (CAM)?

A

Amounts charged to tenants for expenses to maintain hallways restrooms parking lots and other mutually used areas.

32
Q

What are the four types of leases used in commercial spaces?

A

Gross lease,net lease,percentage lease and operating stop or expense stop lease

33
Q

A retail lease may be what type of lease?

A

A percentage lease

34
Q

An office lease may be what type of lease? And is generally for how long.

A

A gross or net lease and usually last about five or more years.

35
Q

What are the two types of lease based on payment of expense of leases property?

A

Gross lease and net lease

36
Q

What does a gross lease provide?

A

For the landlord (lessor) to pay all expenses.

37
Q

I’m a gross lease what are the expenses a landlord pays?

A

Property tax, landlords insurance,liability insurance,and maintenance.

38
Q

In a net lease what does the tenant (lessee) pay?

A

Some or all expenses.

39
Q

Sometimes net leases are called what based on what?

A

Double net,triple net and its based on how many properties expenses the tenant pays.

40
Q

A lessee who contracts for a triple net lease pays what?

A

All expenses associated with the property in addition to the rent except for the debt service.

41
Q

What does a percentage lease have?

A

A base rent plus an additional monthly rent that is a percent of the lessees gross sales.

42
Q

What’s a loft lease?

A

The rental of floor space that is not generally divided into rooms.

43
Q

Brokers who lease commercial space and deal with the property owner or tenant should consider what?

A

Lease duration, the tenant mix in the building, On-site management, building amenities and type of lease

44
Q

Explain Lease Duration?

A

Must discuss if the the business plans to expand and should be planed for
Most short term lease are from 3 to 5 years
Long term lease are generally for ten

45
Q

Explain on site management?

A

Manager will not be present in small building

If manager not present broker should inquire weather some one respond to maintenance calls

46
Q

Explain building amenities?

A

Tenants may want to remodel the space but owner may impose limitations.
Broker should discuss with the owner weather the owner will provide moving allowances or other incentives such as additional parking.

47
Q

What do standard lease clauses include?

A

A use clause,Subordinate Non-disturbance and attornmnent agreement(SNDA) Estoppel Certificate.

48
Q

What is a use clause?

A

Defies how a tenant can and cannot use the space.

New York Real Estate (17 decks)

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