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Real estate > RE Specializations > Flashcards

RE Specializations Flashcards

1
Q

Specializations can come through areas like:

A

Type of clients: Buyers, sellers, investors
Property type: Residential, commercial, land
Service provided: Property management, leasing, short sales

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2
Q

Lease:

A

legal contract containing the terms under which one party rents or leases a property to another for a specified period of time, usually with agreed upon regular periodic payments

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3
Q

Residential Rental Locator:

A

residential rental locator works as an independent contractor to match landlords and tenants, and must be licensed by the Texas Real Estate Commission (TREC); also known as a leasing agent or leasing consultant

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4
Q

Property Manager:

A

real estate license holder who oversees the day-to-day operation of a property for its owner

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5
Q

property manager’s primary or overriding responsibility is to

A

protect the property owner’s investment and maximize the owner’s return on that investment.

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6
Q

Resort Homes:

A

home in which the owner usually does not live on a full-time basis, and the length of ownership as compared to a residential home is usually much shorter

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7
Q

Investment Property:

A

property purchased primarily or exclusively for investment purpose rather than as a place to live

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8
Q

the primary question that most raw land buyers need to answer is whether or not the land is

A

buildable or developable.

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9
Q

contract farming,” which is an agreement between a

A

farmer and a buyer, where the buyer is a corporation that dictates what and how much of what will be grown or raised.

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10
Q

REO (Real Estate Owned):

A

property that is owned by a lender as result of a foreclosure and a failure to find a third-party buyer at a foreclosure auction

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11
Q

investors and first-time home buyers are especially good prospects for

A

REO purchases

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12
Q

Short Sale:

A

sale of a property, with permission of the lender, for less than the balance of the mortgage loan; normally occurs when the borrower is no longer able to make their mortgage payments and hopes to avoid foreclosure proceedings

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13
Q

Reserve Auction:

A

An auction in which a seller reserves the right to accept or reject the highest bid within a predetermined time

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14
Q

Absolute Auction:

A

Also known as a no-reserve auction, it is an auction in which there is no reserve or restriction on price

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15
Q

Minimum Bid Auction:

A

An auction in which a minimum acceptable sale price (reserve), disclosed or not, is set

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16
Q

In Texas, even though auctioneers are unquestionably involved in the sale of real estate, according to Section §101.005(4) of the Texas Real Estate License Act, they are exempt from needing a real estate license as long as:

A

They are licensed as auctioneers under Chapter 1802 of the Texas Occupations Code
They do not perform any other act of a broker or license holder

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17
Q

Acceleration clause:

A

A clause that allows the lender to require full payment of the loan under certain conditions

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18
Q

multi-family residential properties with 5 or more dwellings are considered

A

commercial properties because of the profit-making intent of the property.

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19
Q

Investment:

A

implementation of money to realize profit or gain, usually with an understanding that some degree of risk may be involved

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20
Q

Appreciation:

A

increase in value of a property

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21
Q

Cash flow:

A

Refers to the cash that an investment generates after accounting for the operating expenses, debt service, and taxes associated with the enterprise

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22
Q

Rate:

A

A percentage ratio of the amount of profit or loss to the original cost of investment

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23
Q

Return:

A

The numeric amount of profit

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24
Q

Rate of return:

A

The percentage gain (loss) on the cost of investment over a period of time

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25
Q

Gross Rent Multiplier (GRM):

A

The ratio of the price of investment property to its annual rental income before considering expenses like taxes and insurance, etc.

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26
Q

Liquidity:

A

ease and speed with which an asset can be bought or sold without significantly diminishing the asset’s value

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27
Q

Time Value of Money:

A

concept that states today’s money is worth more now than the same amount will be in the future because of its present earning capacity

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28
Q

Leverage:

A

The use of debt as a tool to stretch an available pool of money farther by using it to mortgage many properties rather than purchase one or a few outright

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29
Q

Loan to Value Ratio:

A

The ratio between a loan amount and the value of the asset purchased by the loan

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30
Q

Operating statement:

A

Used to determine the cash flow potential of a property by providing a clear picture of the rental income stream (cash inflow) and the various expenditures (cash outflow), concluding with a bottom-line, after-tax cash flow

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31
Q

After-Tax Cash Flow:

A

financial performance measure that reflects a property’s ability to generate positive cash flow

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32
Q

The money dedicated to making payments on the principal and interest of a loan is known as

A

Debt service

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33
Q

debt service is deducted from the net operating income to arrive at the

A

pre-tax cash flow.

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34
Q

Gross domestic product (GDP):

A

The total value of goods produced and/or services provided by a country in a year

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35
Q

Risk-reward Ratio:

A

degree of risk tolerance willingly taken on in exchange for a potential reward

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36
Q

Feasibility Study:

A

detailed analysis of the viability of an idea

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37
Q

Capital Improvement:

A

addition, restoration, or remodel of a property in a way that increases property value and/or extends its useful life

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38
Q

Section 1031 Exchange:

A

Allows investors to sell a property and defer payment of capital gain taxes on those sales

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39
Q

Here’s a quick list of some of the primary tax benefits associated with real estate investment:

A

Application of allowable depreciation to create tax-sheltering of income

Application of allowable deductions for rental properties

Implementation of favorable capital gains rules

Use of exchanges to defer taxes

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40
Q

A couple of points of interest to keep in mind about Section 1031 Exchanges:

A

The replacement property must be “like kind” as defined by the IRS

The replacement property must be identified and bought within a specified time frame

The replacement property must be held for at least a year

Capital gains not used in the replacement property purchase will be taxed

A “boot,” the term given to additional capital or property added to the transaction to even out the exchange, will be taxed immediately

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41
Q

Some of the more commonly mentioned disadvantages to investing in real estate include:

A

Expensive: To buy, sell, maintain, and operate

Complex: Requires awareness and compliance to rules, regulations, and laws

Requires Management: Whether by the investor or a third party

Not Liquid: A slow process to convert to cash and willing buyers can be hard to find

Property Taxes: Can be significant enough to dramatically cut into profits

Liability Exposure: Legal and financial

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42
Q

Syndication:

A

When two or more individuals pool their financial resources to participate in a transaction they could not afford to undertake individually

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43
Q

Real Estate Investment Syndicate:

A

A method of pooling forces and resources of individual investors

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44
Q

Limited Partnership:

A

limited liability of a limited partner is confined to the extent of their individual investment in the partnership

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45
Q

Joint venture:

A

Business arrangement that a partnership will use when joining forces for a single business objective

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46
Q

Limited Liability Company (LLC):

A

A hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partner

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47
Q

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with

A

the SEC or find an exemption from the registration requirements.

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48
Q

An accredited investor, as defined in Rule 501 of Regulation D, is either or both:

A

Any person who had an individual income in excess of $200,000 in each of the two most recent years (or joint income with that person’s spouse in excess of $300,000) and has a reasonable expectation of reaching the same income level in the current year.

Any person with a net worth exceeding $1 million dollars, not including the value of their primary residence.

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49
Q

A sophisticated investor is:

A

Any person the issuer or sponsor of the syndication believes has the knowledge and experience in these types of financial matters — even if they don’t qualify as an accredited investor.

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50
Q

On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law by President Barack Obama. The Act required the SEC to

A

write rules and issue studies on capital formation, disclosure, and registration requirements.

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51
Q

A typical real estate syndication combines the money of individual investors with the management of a sponsor and has a three-phase cycle:

A

Organization (planning, acquiring property, satisfying registration and disclosure rules, and marketing)

Operation (sponsor usually manages both the syndicate and the real property)

Liquidation or completion (resale of the property)

52
Q

REIT

A

A company that owns – and typically operates – income-producing real estate or real estate-related assets such as office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and loans

53
Q

Equity REIT:

A

A REIT that earns income for its investors through rent collection or the sale of the properties in their portfolio

54
Q

Mortgage REIT:

A

A REIT that generates income for its investors from the interest earned through origination or purchase of mortgage loans and mortgage-backed securities (MBS)

55
Q

Hybrid REIT:

A

A REIT that combines the income-earning efforts of both the equity and mortgage trust

56
Q

Non-traded REITs are illiquid investments;

A

they generally cannot be sold readily on the open market.

57
Q

Special Purpose Vehicle:

A

limited corporate entity created with a specific objective

58
Q

Collateralized Mortgage Obligations (CMOs):

A

Collateralized debt obligations (CDOs) that are made up of bundles or pools of mortgage-back securities (MBS) created by government agencies or investment banks and issued as investment-grade bonds; almost all CMOs are REMICs

59
Q

Tranches:

A

Mortgage-backed securities that are sold to investors at different risk levels and classes

60
Q

Real Estate Mortgage Investment Conduit (REMIC):

A

A REMIC is a special purpose vehicle (SPV) that holds commercial and residential mortgages in trust, assembles said mortgages into pools based on risk, and then issues bonds (securities) on these pools to sell to investors on the secondary mortgage market

61
Q

A Real Estate Mortgage Investment Conduit (REMIC) is a type of special purpose vehicle (SPV) that:

A

Holds commercial and residential mortgages in trust

Assembles said mortgages into pools based on risk

Then issues bonds (securities) on these pools to sell to investors in the secondary mortgage market

62
Q

While maturity date and risk level are the two primary characteristics by which

A

REMIC mortgage pools are sub-divided, they can be further partitioned by such factors as mortgage term, property size and value, or whether or not the loan is government-backed.

63
Q

These are the main reasons to invest in real estate:

A

Income / Cash Flow: Spendable cash that an investment generates after accounting for the operating expenses, debt service, and taxes

Appreciation: Increase in the value of the property over time

Investment Gain: Increase in value due to active and purposeful development of the property

64
Q

Illegal Target Marketing:

A

Advertisement by a housing provider in niche publications that target specific ethnic or religious groups to the exclusion of the general public

65
Q

Periodic Estate:

A

Has a fixed lease period, meaning that the lease is automatically renewed at the end of each lease period until the landlord or tenant acts to terminate it; also known as periodic tenancy

66
Q

Offer and Acceptance:

A

The mutual agreement of all parties to a lease to consent to all terms contained within the contract and to perform according to those terms

67
Q

Consideration:

A

The benefit that one party bestows upon the other, such as rent

68
Q

Lease Term:

A

The initial rental period from commencement to expiration; the duration of the lease

69
Q

Covenant of Quiet Enjoyment:

A

The right of a tenant to possession and quiet enjoyment of the premises without any disturbance from the landlord

70
Q

Discharge

A

To terminate the lease agreement

71
Q

Sublease/sublet

A

Occurs when the tenant of a property leases to a subtenant either in place of or in addition to the tenant

72
Q

Actual eviction

A

The process by which a tenant is expelled from a property

73
Q

Constructive eviction:

A

Termination of the lease in circumstances where the landlord intentionally failed to provide required repairs or maintenance to such a degree that the premises are considered unusable

74
Q

The requirements of a valid lease are:

A 
Parties to the lease
Competent parties
Offer and acceptance (mutual agreement)
Consideration
Lawful objective
Legal description of the property
75
Q

Can landlords refuse cash as a rent payment?

A

NO.* Landlords must accept a tenant’s timely rent payment in cash, per the Texas Property Code. They must also:

Provide the tenant with a written receipt.

Enter the payment date and amount in a record book maintained by the landlord.

76
Q

Unless a written lease requires the tenant to pay by check, money order, or other traceable or negotiable instrument. In that case, the landlord

A

CAN refuse cash as a rent payment.

77
Q

There are a number of ways a lease can be discharged, all of which tend to fall into these four categories:

A

Upon expiration of the primary term or month-to-month term after proper notice has been provided

By agreement of both the landlord and tenant

By a breach of one of the parties

By operation of law (special statutory rights)

78
Q

A tenant would need to prove certain conditions interfered with their quiet enjoyment of their property. They should:

A

Give their landlord written notice of the problem. ✏️
Allow reasonable time for the landlord to solve the problem. ⏰
If the landlord fails to make necessary changes, the tenant can move out and then seek damages. 💰

79
Q

Texas Property Code is the state’s statutory requirements relating to, well, property. And within that code, you’ll find Title 8, or as it is also known, the Landlord & Tenant Act.
Title 8 contains 4 chapters:

A

Chapter 91: Provisions Generally Applicable to Landlords and Tenants
Chapter 92: Residential Tenancies
Chapter 93: Commercial Tenancies
Chapter 94: Manufactured Home Tenancies

80
Q

The landlord must give the tenant a copy of the signed lease within

A

three business days of signing a lease.

81
Q

Landlords can charge their tenants late fees for not paying their rent on time, but there are three conditions that must take place in order for them to charge a tenant a late fee:

A

The landlord must include the late fee charge in the lease.*
The late fee must be reasonable.
The tenant must be at least one full day late.

82
Q

Late payments also take on two forms:

A

an initial late fee and a daily fee per day for every day late after the initial day.

83
Q

Deductions from the security deposit, other than normal wear and tear, could include:

A

Damages
Cost to clean, exterminate, etc.
Unpaid rent
Replacing unreturned keys, remotes, etc.
Removal of unauthorized locks
Packing and removing abandoned property, including vehicles
Costs of reletting if tenant was in default in lease
Other deductions as stipulated in the lease agreement

84
Q

According to the Texas Property Code, landlords must make repairs within a reasonable amount of time. What’s a reasonable amount of time?

A

Seven days

85
Q

For members of the Texas Association of REALTORS®, there is a helpful form titled Residential Lease ….

A

Inventory and Condition Form …that serves as a a written document describing the move-in condition and move-out condition of the property.

86
Q

landlords must inspect smoke alarms:

A

At the beginning of each lease

Whenever a tenant reports one malfunctioning*

Whenever a tenant requests an inspection*

87
Q

Texas Property Code states that landlords must install the following:

A

Window latch on each exterior window
Doorknob lock or keyed deadbolt on each exterior door
Sliding door lock on each exterior sliding glass door
Sliding door handle latch or security bar on each exterior glass door
Keyless bolting device and a door viewer on each exterior door

88
Q

Landlords must rekey residences within

A

seven days of a tenant turnover (tenant moving out, new tenant moving in).

89
Q

Gross Lease:

A

Lease in which the tenant pays a simple, flat rent every month

90
Q

Net lease:

A

Lease in which the (usually commercial) tenant pays a base rent rate plus property taxes

91
Q

Double-net lease

A

Any net lease that requires a tenant to pay a base rent, property taxes, and insurance

92
Q

Triple-net lease:

A

Any leasehold that requires a tenant to pay a base rent, property taxes, insurance, and maintenance expenses

93
Q

Percentage Lease:

A

Type of (usually commercial) lease in which the tenant pays a base rent amount and a percentage of their business profits to the landlord

94
Q

Variable lease:

A

leasehold agreement in which the base rent changes

95
Q

Graduated lease:

A

Variable lease agreement in which the amount of rent increases at fixed future dates

96
Q

Index lease

A

Variable lease agreement that allows for a graduated increase of rent at periodic intervals, with increases relative to some economic indicator, such as the Consumer Price Index

97
Q

Ground lease:

A

Lease of bare, undeveloped land

98
Q

Oil and gas lease:

A

Grants the exclusive right to extract any oil or gas from the ground beneath a property

99
Q

Lease purchase agreement

A

Lease in which part of a tenant’s rent is applied to the purchase price of the property, and the title to the property transfers upon full payment of the stated sale price

100
Q

Sale and Leaseback Agreement:

A

Agreement in which a business owner sells their interest in a property and then leases it back at the same monthly rate, usually from an investor owner and, in doing so, frees up capital for other business ventures

101
Q

Property managers

A

Licensed real estate professionals who manage all types of property; from homes and duplexes to office and industrial complexes, shopping centers, apartment buildings, and condominiums

102
Q

REO property

A

Short for “Real Estate Owned”; refers to bank-owned properties that have been through the foreclosure process

103
Q

Rent roll:

A

A report of all the data about a rental property, including tenant identities, rent rates, lease terms, and outstanding balances

104
Q

Property managers are charged with a wide variety of duties, but they all tend to fall under four main areas of responsibility:

A

Financial & marketing
Tenant & occupancy
Facility management
Administration & risk management

105
Q

A property manager is generally responsible for meeting several financial objectives:

A

Preserving the value of a property

Controlling the operating costs of the property

Generating income for the owner (through rent)

Finding ways to maximize income for the owner (things other than rent)

Other financial concerns as outlined in the management agreement between the property manager and the owner

106
Q

Property managers can specialize in these broad categories of property:

A

Residential
Commercial
Industrial
Special-purpose

107
Q

Industrial property includes the facilities that

A

manufacture products or materials.

108
Q

special-purpose accommodate a specific purpose for a particular business. For example, things like:

A 
Theaters and entertainment venues
Sports arenas
Hotels
Resorts
Schools and universities
Places of worship
Nursing homes/elderly care facilities
109
Q

property manager’s first duty is to (fiduciary duty)

A

The owner

110
Q

Management fees

A

management fee is the price that the owner pays the manager (or management company) for their services.

111
Q

Generally speaking, the management fee can come in two forms:

A

Percentage Fee: A fee paid to the manager based on the effective gross income (EGI) of the building. This includes income from rent plus additional revenue streams.

Flat Fee: Also known as a base fee, this is a fixed fee paid per unit, not based on a percentage of the income.

112
Q

The management agreement will outline exactly which reports the owner expects to see and how frequently (monthly, quarterly, annually, etc.). These can include things like:

A 
Maintenance report
Rent roll
Delinquent account report
Operating statement
Other reports as required by the owner
113
Q

Three of the most important financial figures* a property manager must be acutely aware of are:

A

Potential Gross Income
Effective Gross Income
Net Operating Income

114
Q

Operating Budget

A

A budget created from taking anticipated revenues and expenses and then planning for the long-term goals of the property owner

115
Q

Capital expenditures

A

Funds used by a company to acquire or upgrade physical assets like property, industrial buildings, or equipment

116
Q

Non competing clause

A

Section of commercial lease that gives a tenant the exclusive right to operate their business without any competition in the same property

117
Q

Occupational Safety and Health Administration (OSHA):

A

The government agency charged with the task of ensuring that employers are responsible for providing safe and healthful workplaces for their employees

118
Q

The property managers will oversee:

A

Physical condition and environment of the property: A property manager maintains, monitors, and improves the state of the property to ensure the best possible environment.

Rental rates: A property manager will adjust and evaluate rates for the rental properties in order to keep the total income high.

Expenditures: A property manager manages expenditures to make sure that all costs are kept as low as possible so that everything that must be done gets done efficiently.

119
Q

FACTA

A

is an amendment to the Fair Credit Reporting Act. It adds provisions designed to improve the accuracy of consumers’ credit-related records and gives consumers the right to one free credit report per year from the credit reporting agencies

120
Q

Someone’s first name or initial and last name cannot be used in combination with the following things:

A

Social Security number
Another kind of government issued identification number
Driver’s license number
Mother’s maiden name
Any financial information
Biometric data
Information about that person’s physical or mental health

121
Q

Industrial and Commercial Lease Concessions: Questions

Just how far should a property manager go to make concessions happen for new tenants?
Three major things can help a manager decide what to do in these situations. A property manager should ask themselves:

A

What is the property owner’s financial and strategic position? (And more so, what are their long-range goals and urgency to lease?)

What is the competition like in the area market right now?

How urgent is the prospect’s need to move?

122
Q

There are few different ways to make concessions. The most common are through the adjustment of

A

rental schedules, rebates, the length of the lease period, or tenant alterations.

123
Q

Economic viability is

A

when a project or property is both economically feasible and will have a positive impact on the area around it

124
Q

property managers have to keep an eye on:

A

Hazardous wastes produced by their tenants, to ensure that they are discarded properly

Any potential violation of the laws requiring segregation and recycling of types of waste

Potential mold growth

Asbestos

Leaks or water accumulation

125
Q

When considering a possible risk, an anticipatory property manager has a few different roads they can take. To help you remember them all, think of the acronym

A

ACTOR: avoid, control, transfer, or retain.

126
Q

The benefits that property management professionals associated with the NARPM® offer to the single-family property owner include:

A

Improved renter selection through background checks and screening

Maintenance contracts

Rental listings with a broader audience

Tax deductible property management fees

127
Q

Specifically, your client (the property owner) will want to know this about the property manager/management company:

A 
Years in the business
Reputation in the industry
Available references
Accreditation
Insurance coverage
Number of properties managed
Maintenance and tenant relations procedures
Financial reports and management software used
Services offered

Real estate (13 decks)

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