MF Investing Flashcards
Stabilized cash flowing properties that are typically located in primary markets
Core
Underperforming properties located in primary or secondary markets
Core-Plus
Properties ripe for renovation or stabilization, located in primary, secondary or tertiary markets
Value-Add
One of the riskiest project types as these have little to no existing cash flow
Opportunistic
Developing land into any product type
Ground-Up Devlopment
Property Classes are based on
combination of physical, geographic, and demographic characteristics
Whats considered as one of the “safest” investments from a risk perspective?
Class A
Usually commands high rents and cash flow.
Class A
Has few amenities, and usually commands fewer rents.
Class B
Able go attract quality, stable tenants even if overall building vacancy tends to tick higher
Class B
Can be lucrative for those with a solid investment strategy but these properties are certainly not without their risk
Class C
Generally over 20+ years older and are in need of significant renovation
Class C
Offers the highest cash flow. Hard earned as these buildings are often management intensive
Class C
Attracts high income earning professionals with high credit scores
Class A
What factors into property classification
Location Age of Building Property condition Amenities Occupancy
Biggest risk with investing in Class A is
Oversupply
Risk associated with investing in Class B is the threat of
Competition
Two largest risks to investing in Class C real estate is
Cost of Repairs
Maintenance Over time
Lower credit and employment stability of tenants
Benefits to Class A
Most desirable renters
6 figure Earners/ Long term tenants
Primary benefit to investing in Class B
Highly durable during economic cycles
Primary benefit to investing in Class C
Price point. Appeals to the broadest range of investors.
Markets with +10 cap rates appeals to
Investors that deploy value add strategies
Low cap rates such as 3-5% being the most attractive place to invest because
Its well established and has high rents. It also has high purchase prices and barriers to entry
Net operating income to property value
Cap Rate
All debt and equity sources combined that were used to fund an investment in real estate
Capital stack
The annual gross cash flow of an investment expressed as a percentage of the initial cash invested.
Cash on Cash Return
Economic incentive granted by an owner to encourage the leasing of space or the renewal of a lease
Concession
NOI to mortgage debt service
Debt Service Coverage Ratio
Net profit + max equity / max equity
Equity Multiple
Amount of rent that an owner would collect if all apartments were occupied and all residents were paying the market rent
Gross Potential Rent
Revenue minis all operating costs, excluding debt service, depreciation, capital expenditures, and income taxes.
Net Operating Income
The % of total apartment units that are occupied
Occupancy Rate
Un discounted return over a single period expressed as a % of the initial capital invested
Return On Investment
(Gains - Cost)/Cost
The sum of all operating costs, not including interest, depreciation, and amortization
Total Operating Expenses
Ratio between the number of units vacated during a specific time period
Turnover Rate
Amount of rent that could have been collected from vacant units if they had been occupied and leased at current market rates
Vacancy Cost
Mortgage that does not have a fixed interest rate
Adjustable Rate Mortgage
Loan that has a predefined interest rate for the entire term of the loan that never changes
Fixed Rate Mortgage
Home or apartment that is completely or very close to move in ready
Turnkey Property
The reduction or elimination of a continuing charge required to be laid by a tenant under a lease for a specified period of time
Abatement
Taxes which are assessed “according to value” such as property taxes
Ad Valorem
% by which the useable sq ft of a tenants premises is increased to arrive at net rentable sq ft. Reflects an allocation of the sq ft of common areas within the building.
Add On Factor
Property insurance which covers losses occurring from fire, explosion, and other perils.
All Risk
Allocation of the cost of an item over its estimated useful life or the payment of an indebtedness by periodic installments
Amoritization
Primary tenant in a shopping center
Anchor tenant
The transfer of ones property, interest or rights to another
Assignment
The act of assuming the obligation of a tenant under a lease
Assumption
The formal agreement by a tenant to become the tenant of a new landlord including the right of the new landlord to collect rent and enforce the provisions of new leases
Attornment
For gross leases the $ amount which recoverable expenses must exceed before a tenant is required to begin paying expense recoveries
Base Amount(Base Stop Amount)
The minimum amount of rent due under a lease
Base Rent
For gross leases, the recoverable expenses for an annual time period above which a tenant is required to pay their proportionate share of such expenses.
Base Year
In retail leases, the amount which Gross Sales must exceed before a tenant is required to begin paying percentage rent.
Breakpoint:
An individual or company who acts as an intermediary to negotiate the sale, purchase or lease of real estate.
Broker
The option to terminate, either partially or entirely, a leasehold interest prior to the stated Expiration Date. In some cancellations, the lease requires the terminating party to pay a fee for the right to cancel.
Cancellation Option
The maximum amount which is required to be paid by a tenant for a charge which, in the calculation of such charge, includes a component which is outside of the tenant’s control.
Cap
An improvement (as opposed to a repair) to a fixed asset which will increase the value or useful life of that asset.
Capital Expenditure
The complete or partial destruction of property as the result of a sudden or unexpected event, such as a flood, fire, storm, etc.
Casualty
A document provided by an insurance company which indicates that a landlord or tenant’s insurance policy is in effect and the levels of coverage contained within the policy.
Certificate of Insurance:
The date upon which the landlord and tenant’s rights and obligations pursuant to a lease begin.
Commencement Date:
Item(s) of economic benefit granted from a landlord to a tenant to induce the tenant to enter into a lease transaction. Includes rent abatements/free rent, moving allowances, lease buyouts, above standard tenant improvement allowances and space plan/drawing allowances.
Concession
The taking of private property by the government for public use through the process of eminent domain.
Condemnation
A clause in a retail tenant’s lease which obligates the tenant to remain open for business throughout the term of its lease.
Continuous Operations Clause
The option of a tenant or landlord to reduce the amount of space leased by such tenant
Contraction Option
A clause in a retail tenant’s lease which provides remedies to a tenant in the event that another tenant, typically an anchor or major tenant, ceases its operations at the property.
Co-Tenancy
Abbreviation for ‘doing business as’. Represents a tenant’s trade name, as opposed to the legal name of the tenant’s business.
DBA
