Part 5 Vocab Flashcards
the actual rental income specified in a lease
contract rent
total base rent, or minimum rent stipulated in a lease, over the specified lease term minus rent concessions; the rent that is effectively paid by a tenant net of financial concessions provided by a landlord
effective rent
operating expenses such as property taxes and insurance that generally do not vary with occupancy and that prudent management will pay for whether the property is occupied or vacant.
fixed expenses
the type of lease where the landlord (lessor) pays all the operating expenses
gross lease
the most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement, including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations, term concessions, renewal and purchase options, and tenant improvements; the lessee and lessor each acting prudently and knowledgeably and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby:
- lessee and lessor are typically motivated
- both parties are well informed or well advised, and acting in what they consider their best interests
- the rent payment is made in terms of cash and is expressed as an amount per time period consistent with the payment schedule of the lease contract
- the rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.
market rent
the type of lease where the tenant (lessee) pays all the operating expenses
net lease
Note: in some markets, net lease may mean the tenant pays only a portion of operating expenses.
Triple Net Lease ( or Absolute Lease) may be used to describe a lease in which the tenant pays all of the operating expenses.
an allowance that provides for the periodic replacement of short-lived building components that wear out more rapidly than the building itself and must be replaced periodically during the building’s life (ex: roof covering, carpeting, boilers, driveways)
replacement allowance
income due under the existing leases
Scheduled rent
the ratio of total operating expenses to effective gross income. (TOE / EGI)
Operating Expense Ratio (OER)
Note: This is the complement of the net income ratio (OEI = 1 - NIR)
an allowance for deductions from PGI made to reflect rental income reductions due to vacancies, tenant turnover, and nonpayment of rent.
Vacancy and collection loss
Note: typically applied as a percentage to PGI and can come from published surveys or an appropriate personal survey of the local market
operating expenses that generally vary with the level of occupancy or the extent of services provided
variable expense
rental income received in accordance with the terms of a percentage lease; typically derived from retail stores and restaurant tenants and based on a certain percentage of their gross sales
percentage rent
the percentage rent paid over and above the guaranteed minimum rent or base rent; calculated as a percentage of sales in excess of a specified breakpoint sales value.
overage rent
Note: This is NOT excess rent but is a contract rent.
the amount by which contract rent exceeds market rent at the time of the appraisal; created by a lease favorable to the landlord and may reflect unusual management, knowledgeable or unusually motivated parties, a lease execution in an earlier, stronger rental market, or an agreement of the parties.
excess rent
the periodic expenditures necessary to maintain the real estate and continue production of the EGI, assuming prudent and competent management
operating expenses
