Investment Real Estate

Question 1

Gross Operating Income or Effective Gross Annual Income

Answer 1

Gross Annual Income less collection cost less vacancy rate

Question 2

Usual Vacancy Rate

Answer 2

Amount of vacant units divided by total rentable units

Question 3

Net Operating Income (NOI)

Answer 3

The Effective Gross Income minus Expenses

Question 4

Annual Debt Service

Answer 4

Yearly cost of repaying debt

Question 5

Funded Reserves

Answer 5

Available cash set aside for maintenance and repair

Question 6

Before Tax Income

Answer 6

NOI - depreciation + reserve allowances - mortgage interest paid

Question 7

Depreciation

Answer 7

A decrease in value due to physical deterioration, functional or economic obsolescence.

Question 8

After-Tax Income

Answer 8

(Before tax income - tax liability)

Question 9

Loan To Value

Answer 9

LTV = Loan amount ÷ Value

Question 10

Debt Coverage Ratio

Answer 10

DCR = NOI ÷ debt service

Question 11

Operating Expense Ratio

Answer 11

operating expense / gross income:

Question 12

Price Per Square Foot Ratio

Answer 12

Price of property / square foot

Question 13

Expense Per Square Foot Ratio

Answer 13

Annual expenses / Square foot

Question 14

What are the five types of lease?

Answer 14

A Gross lease
A Percentage lease
A Net lease
An Index lease
A Step-up lease

Question 15

Break Even Ratio

Answer 15

(Operating expenses - reserves + debt service) ÷ gross income

Question 16

Equity Dividend Rate

Answer 16

Equity Investment / Before Tax Cash Flow.

Question 17

Overall Capitalization Rate

Answer 17

(NOI) / property value

Question 18

Loan Constant

Answer 18

Debt service / investment value