Module 5 Flashcards
Found by dividing the net income of a property by its sales price
capitalization rate
Deducted from gross income to determine the net operating income
operating expenses
The passive increase in the value of a parcel due to market forces
appreciation
The amount of rent that will be collected in a year, assuming that a property was fully rented with no vacancies and no credit losses
gross scheduled income
The ease of converting an investment into cash
liquidity
____________ is a passive increase in value.
Appreciation
Advantages for investment include:
- Tax-sheltered Income
- Favorable capital gains tax treatment
- Deferred taxation on exchanges
___________ may be organized as limited or general partnerships, or a corporation.
Real Estate Syndicate
Real Estate Investment Trusts (REIT) are in 2 forms:
- Equity
- Mortgage
The two largest Real Estate Mortgage Investment Conduit (REMIC) are
Fannie Mae and Freddie Mac
Colin is interested in investing in real estate because it offers a higher rate of return than other investment products currently on the market. Since he does not have a large amount of capital to purchase a commercial property outright, he should consider purchasing shares in a _____ that has more than 100 investors involved.
Colin should consider purchasing shares in a real estate investment trust that has more than 100 investors involved.
Ali and his family own three small retail properties (strip malls with tenants) as investment properties. The 2018 total gross income collected from rents, parking, and other fees comes out to $385,000. Expenses for operating the properties totaled $57,500. What was the NOI for Ali’s investment properties for 2018?
The NOI was $327,500.
Matteo is listing one of his freestanding commercial buildings for sale. The building is occupied by a major fast-food chain on a 15-year lease with 5-year renewal options. Business is good, ensuring the tenant will stay in the location in the long term. The asking price is $2,500,000 with an annual NOI of $148,000. What is the cap rate?
The cap rate is 5.92%.
Asmaa’s 8-unit apartment building is fully rented with 6 1-bedroom units renting for $1,200 per month and 2 2-bedroom units renting for $1,450 per month. Expenses for the property include property management fees, insurance, property taxes, and maintenance cost Asmaa in excess of $45,000 per year. What is the gross scheduled income for the property?
The gross scheduled income is $121,200.
