Income Flashcards
Annuity
payments of predictable amounts paid at constant intervals. -1 in payment solve for FV
Ordinary annuity
payments at the end of the period
Annuity in advance
payments at the beginning of the period
What is the formula for change
End # / Begin # -1
How do you calculate the annual rate of change?
white keys, solve for i
If a value completely declines or erodes in value what is the change on a percentage basis
-100% or -1
How do you calculate a compounded interest rate? Is this direct cap or yield cap?
1-(1+(Y/n)^n or with the white keys solve for i
Yield cap
Sinking fund factor
amount per period to get a specific end value +1 in FV solve for PMT
Present worth factor
what is money in the future worth today? +1 in FV solve for PMT
Present worth of an annuity factor
PV of an income stream +1 in PMT solve for PV
Amortization factor
Loan constant +1 in PV solve for PMT
other terms for the mortgage constant
Annual Amortization factor, Rm, Amortization factor, loan constant, rate to mortgage, mortgage cap rate
what is the formula for the loan constant
Rm = Ym - change Vm*SFF
For a fully amortizing loan does the loan constant remain constant over time?
No. It declines every time a payment is made so the Rm goes up after each payment
What’s the difference between the Ym and the Rm
The Ym is the yield to the mortgage - this is the interest with no points. The Rm is the rate to the mortgage - this is the loan constant.
Im/Vm = Rm Im/Rm =Vm
What are four ways to describe the Ym
Yield to the mortgage, interest rate with no points, lender’s return on, borrowers cost of capital as a %, interest portion of loan payment (what the bank makes on the loan)
What are two ways to describe the Rm
lenders rate of return on & of, principal & interest (what you pay the bank)
Loan constant - how is it computed and expressed?
Rm the amount needed to amortize $. computed monthly, expressed annually
SFF- how is it computed and expressed?
SFF always calculated annually at the yield rate over the holding period. It is used to spread value change over the holding period
How do you calculate a loan balance
calculate payment, change n to reflect the payments made, calculate FV. OR change N to relfect payments to go and calculate PV.
Less common direct cap relationships
NIR =NOI/EGI, NIR = EGIM/NIM, NIR = ROx EGIM
What are the reciprocal relationships between rates and multipliers
1/R=M, 1/8% = 12.5
1/M =R 1/12.5 =8%
How much is a basis point?
one one hundredth of a percent. 100 basis points = 1%
What is another name for a partially amortizing loan?
balloon payment
What are synonymous terms for level income?
level, fixed, constant stable
What are synonymous terms for compounded income?
exponential, curvilinear, percentage, compounded or constant ratio change +5%
What is the formula for yield capitalization in a dcf
V = I1/(1+Y)^1+ I2/(1+Y)^2 etc
How do you discount a level income stream on an HP?
solve for PV with white keys
How do you discount an income stream that isn’t level on an HP?
solve for f NPV with blue keys, but don’t forget to add the reversion to the last years income and put in the I
How do you calculate loan yield?
find the payment, then solve for i x 12. if there are points deduct them from the PV AFTER you solve for PMT, then solve for i,
if there is a balloon, solve for the PMT then change the N to the balloon term, then solve for i. If both, both -balloon first.
What do points do to the loan yield? When should you pay them?
If points are paid the loan yield increases when the loan is paid before maturity or if there is a ballon. Pay them if you are going to hold the loan a long time.
How do you level the income?
blue keys, I = yield rate/discount rate solve for fNPV. THEN solve for PMT- make sure the n key has the correct number of periods or reenter info.
what is face rent?
the contract rent before adjustments for TI and concessions
What is effective rent?
rent after adjustment for supernormal TIs, concessions and other factors
What is breakpoint in an percentage rent clause? What is the natural breakpoint?
the level of sales where a percentage clause is first initialized. The level where percentage sales rent = base rent. Divide base rent by first %age.
How do you calculate percentage rent with the Straight Line Method?
Total potential rent over the entire term
Less free rent
Less TIs
Less and credits
Net Collected Rent
/ number of years
/ amount of space = effective rent per s.f.
How is the Modified Straight line method different from the straight line method?
you may have to include the interest on the TIs. Amortize the TIs and add the interest to the amount.
How is the level-equivalent method different?
calculate it with the blue keys on a per/ s.f. basis.
Put the TIs in CFo then deduct each years expenses from the rent.
Put the moving credit in year one. Calc for NPV then use the white keys to calculate the PMT to get the sf rent.
Relationships in leases
with the teeter-totter drawing, the higher number goes down because its bigger (heavier). If the income to the FS is greater than the income to the LF, the YLH is greater than the Y to the LF.
If a site is not improved to its H & B use but a lease prevents immediate redevelopment so VLF < VFS. How do you calculate this?
sale price now in PV, value growth rate = i. solve for the future value. Switch to the discount/yield rate & put the rent in as PMT. Solve for PV. The difference in PVs is the impairment.
Potential Gross Income PGI
all expected income
Effective Gross Income
all income actually collected
Pass-through
a clause that allows a landlord to pass through expenses AFTER the base year
Expense stop
limits a landlords exposure to real estate expenses
Expense cap
limits a tenants exposure to real estate expenses
What order should expenses go in?
Fixed, variable, replacements
What is the effective tax rate ETR and how do you calculate it?
(tax additur) rate added to cap rate. $Tax /$market value
How do you find the market value for taxation purposes using a loaded cap rate?
NOI (not including taxes, add back if necessary)/loaded rate(rate+ETR)
Replacement allowances - what are the 8 methods to handle reserves?
Straight line (cost/life), sinking fund, $/s.f. bldg area, % of EGI, in cap rate, cost deducted in DCF in correct year, implied in yield rates
Operating Expense Ratio
A measure of what it costs to operate a piece of property compared to the income that the property brings in. Operating Expenses/Effective Gross Income EGI
Net Income Ratio
Net operating Income NOI / Effective Gross Income EGI
OER & NIR
If EGI Is $100 and NOI is $60 and Expenses are $40, OER is 60% NIR is 40% sum of the parts = $100.
What does the K factor do? Where do you find it?
Levels an income stream that changes at a constant ration(%), in a table.
