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RE Finance & Invest > Final Exam > Flashcards

Final Exam Flashcards

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1
Q

Who values the property in the county and administering all the property tax exemptions?

A

The property appraiser

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2
Q

The five functions of the Property Appraiser:

A

(1) Review and Process all Deeds and Related Documents

(2) Provide a map of all the properties within the county

(3) Monitor all improvements and developments within the county

(4) Identify all tangible property

(5) Identify all railroad and mineral rights in the county

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3
Q

When are properties valued by the appraiser?

A

January 1 Each Year

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4
Q

Factors to consider in valuing a property:

A

(1) Location
(2) Size
(3) Cost of Property & Present Replacement Value of any Improvements
(4) Condition
(5) Income
(6) Net Proceeds

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5
Q

Three Valuation Types

A

(1) Cost Approach
(2) Sales Comparison Approach
(3) Income Approach

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6
Q

What is the procedural process for an appeal of a property valuation? (5 Steps)

A

(1) Assessment
(2) Notice
(3) Property Appraiser
4) Value Adjustment Board
(5) Circuit Court

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7
Q

Strategies for Defeating NIMBYism

A

(1) Outreach / Give What You Can
(2) Make Friends
(3) Crowd the Room
(4) Lean on the Law and Pretty Pictures
(5) Keep the Moral High Ground

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8
Q

Six Things Land Use Attorneys Do:

A

(1) Zoning (Variances & Rezoning)
(2) Permits (Obtaining Permits)
(3) Environmental Issues
(4) Easements & Boundaries
(5) Advice on RE Dev.
(6) Legal Challenges (Disputes / Appeals)

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9
Q

What type of law “Creates”

A

Transactional Law

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10
Q

What type of Law “Destroys”

A

Litigation

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11
Q

Who are the Parties to RE / Construction Project

A

(1) Owner (Developer) – Tier 1
(2) GC – Tier 2
(3) Design Team (Architect & Engineer) – Tier 2
(4) Surety (Bond) – Tier 2
(5) Subcontractors (Roofer, Stucco, Windows, Etc) – Tier 3

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12
Q

What is Risk Allocation in Construction Law?

A

Determining who will bear certain risks associated with a contract.

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13
Q

Mechanisms for risk allocation:

A

(1) Contracts / Subcontracts
(2) Surety Bonds
(3) Insurance

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14
Q

Types of Risk in Construction (8)

A

(1) Cost Overrun
(2) Delay in Completion
(3) Incompetent Contractors / Subs
(4) Subcontractor Default
(5) Environmental Risks or Acts of God
(6) Design Errors
(7) Unforeseen Conditions
(8) Accident or Injury

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15
Q

What is the “Life Cycle” of a Project in Construction Law?

A

(1) Property
(2) Land Use / Zoning
(3) Design - Plans
(4) Permitting
(5) Procurement (Bidding)
(6) Contracting (Licensing)
(7) Commencement of Work (Notice of Commencement)
(8) Construction Phase
(9) Warranty / Post Construction Defects

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16
Q

Most Common Legal Disputes in Construction (7)

A

(1) Payment Claims (Liens)
(2) Delay Claims
(3) Unforeseen Conditions
(4) Performance Claims (Poor Workmanship)
(5) Defective Construction
(6) Spoliation / Duty to Preserve
(7) Injuries / Damage to Other Property

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17
Q

What is the Statute of Limitations on Construction issues?

A

4 years

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18
Q

What is the Statute of Repose on Construction issues?

A

7 Years (earlier of TCO, CO, or abandonment)

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19
Q

What is securitization?

A

Pooling of assets to repackage them into interest-bearing securities

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20
Q

What are commercial backed securities?

A

Single mortgages transferred into trust and rated (AAA, BBB) and sold to investors

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21
Q

What are the key items in a LOI? (10)

A

(1) Parties
(2) Property
(3) Intended Improvements
(4) Price
(5) Deposits
(6) Due Diligence
(7) Closing Conditions
(8) Contingencies
(9) Extensions
(10) Expiration

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22
Q

Basics of a PSA (5)

A

(1) Who (Buyer/Seller/Escrow)
(2) What (Property)
(3) When/Where (Closing)
(4) Why (Intended Use)
(5) How (Everything Else)

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23
Q

What are the “Intangibles” in a PSA?

A

Permits, Land Use, Design Documents, Contract Rights, IP

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24
Q

What is a Schedule B-I

A

Deed Conveying Property to Purchaser
Good Standing of Buyer & Seller
Taxes Paid on Property
Payment of Premiums

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25
Q

What is a Schedule B-II

A

Liens, Encumbrances, Claims of Possession, Easements,

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26
Q

What is on a Survey?

A

Flood Zones
Bodies of Water
Encumbrances
Encroachments
Easements
Topography

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27
Q

What is a CPM Schedule?

A

Critical Path Method

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28
Q

NOI

A

Income - Expenses

28
Q

What is Gross Potential Rent (GPR)?

A

Max Amount of Rental Income

29
Q

NOIAR

A

NOI After Reserves

30
Q

Operating Expense Ratio Calcualtion

A

Operating Expenses / NOIAR

31
Q

Debt Service =

A

Mortgage Payment (P&I)

32
Q

Debt Service Coverage Ration (DSCR)

A

NOIAR / Debt Service

33
Q

Cash Flow =

A

NOIAR - Debt Service

34
Q

Cash on Cash =

A

Cash Flow / Equity

35
Q

Cap Rate =

A

NOIAR / Value

36
Q

Dev Yield =

A

NOIAR / Cost

37
Q

Net Rental Revenue (NRR) =

A

Gross Potential Rent (GPR) - concessions, Vacancy, bad debt, los to lease

38
Q

Operating Expense Ratio =

A

Operating Income ÷ NOIAR

39
Q

Class A Real Estate

A

Newer, Institutional

40
Q

Class B Real Estate

A

Older, Aggressive Institutional

41
Q

Class C Real Estate

A

Older and/or Declining Area

42
Q

Class D Real Estate

A

Older or Declining Area & Poor Condition

43
Q

Dev Yield (Yield on Cost) =

A

NOI ÷ Project Cost

44
Q

What are “Carve Outs?”

A

Bad Boy Provisions – Personal Liability on Owner

45
Q

Pari Passu

A

Equal Treatment of Two+ Parties in an Agreement

46
Q

Key Components to a LOI:

A

(1) Parties
(2) Description
(3) Proposed Terms
(4) Deposits
(5) Due Diligence
(6) Required Approvals
(7) Special Terms
(8) Closing Date

47
Q

What is a no shop clause?

A

Seller can not shop the offer with others.

48
Q

Florida Transfer Taxes =

A

$0.70 for every $100.00

49
Q

Schedule A has what?

A

Parties, Amount, and Property

50
Q

Schedule B-1 has what?

A

Requirements for Issuance of Policy, Payoff of Existing Debt, and Included in PSA

51
Q

Schedule B-2 Has What?

A

Exceptions to Title

52
Q

Passive Activity Rule Statute is

A

I.R.C. 469

53
Q

Two elements of IRC 469:

A

(1) Conduct of any trade or business; AND
(2) Taxpayer does not materially participate

54
Q

Ways in Which Someone Materially Participates:

A

(1) Individual Participates More than 500 Hours
(2) Individual Participation in the activity constitutes substantially all of the participation in such activity of all individuals
(3) Individual participates more than 100 hours and exceeds others participation

55
Q

All business activities are classified as:

A

Active or Passive

56
Q

How to determine if an individual is active or passive?

A

Use the material participation test

57
Q

Real Estate Professional Exception

A

Real Estate Activities are automatically passive unless exception applies.

58
Q

Cost segregations allow what type of depreciation?

A

Faster

59
Q

Cancellation of Debt is:

A

When debt is cancelled or forgiven it becomes income

60
Q

Cash Flow =

A

NOI – Debt Service

61
Q

Calculate Construction Loan =

A

Cost x LTC

62
Q

How much equity is required Calculation =

A

Cost – Construction Loan

63
Q

Dev Spread =

A

Dev Yield – Cap Rate

64
Q

Dev Yield (Yield on Cost) =

A

NOIAR ÷ Cost

65
Q

Calculate Annual Amortizing Debt Service =

A

NOIAR ÷ Debt Service Coverage Ratio (DSCR)

66
Q

Calculate Interst Only =

A

Loan Amount x I/O Debt Service

67
Q

Calculate I/O Debt Service =

A

NOIAR – I/O Debt Service ÷ Cash Flow

68
Q

Calculate Debt Yield =

A

NOIAR ÷ Loan Amount

RE Finance & Invest (2 decks)

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