Chot 20–Connercial/Investmwent properties

Question 1

Liquidity

Answer 1

The ability to convert an asset into cash quickly without losing the principal.

Question 2

Leverage

Answer 2

The effect borrowed funds have on investment returns.

Question 3

Gross Potential Income

Answer 3

Total cash/non-cash income received from a business before expenses made or losses accounted for.

Question 4

Pro Forma

Answer 4

Annual property operating data to show the hypothetical projection of income and expenses for the first full year of ownership.

Question 5

MARKET RENT

Answer 5

Rent that would be possible to charge if adjusted to appropos market levels.

Question 6

FIXED EXPENSES

Answer 6

Expenses that occur on a regular basis which generally donMt vary i.e. property taxes, insurance, etc

Question 7

Variable Expenses

Answer 7

Expenses that are necessary to maintain the income stream of the property and provide services to the tenants. Ex: maintenance, repairs, etc.

Question 8

EFFECTIVE GROSS INCOME

Answer 8

Rental income the owner expects to collect and will be available to pay the operating expenses.

Question 9

NET OPERATING INCOME

Answer 9

Annual income from property or business that remains once annual operating costs are paid.