Real Estate Investments And Business Opportunity Brokerage Flashcards

1
Q

Going concern value-

A

When business has been in operation for a long time

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2
Q

Leverage-

A

When investor used borrowed money to purchase piece of investment

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3
Q

Accrual accounting-

A

Future income/ future debts are shown as they are received/ invoiced

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4
Q

Income tax term meaning an investment that will reduce/ shield $ from income tax

A

Tax shelter

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5
Q

(NOI) net operating income-

A

$ left after vacancy rate/ operating expenses are deducted

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6
Q

NOT an advantage of investing in real estate-

A

Lack of liquidity

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7
Q

Cap rate-

A

Percentage that expresses the amount of risk that an investor is willing to make

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8
Q

Appreciation-

A

How much property value grows in value from year to year

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9
Q

Adjusted basis-

A

Original cost basis of a property reduced by certain deductions/ increased by certain improvement costs

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10
Q

Cash flow-

A

Amount of spendable income after expenses have been deducted from the gross income. Cash flow can be both positive and negative

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11
Q

Capitalization rate-

A

Percent/ return for an investor on his money when investing in real estate

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12
Q

Capital gain-

A

Income tax term regarding tax term regarding taxable profit made from sale of property or any capital asset

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13
Q

Equity

A

Amount of value/ interest that that an owner has in property over/ above loans attached to property

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14
Q

Leverage

A

Use of other peoples money (borrowed) to spread risk of investment

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15
Q

Liquidity-

A

How fast a property can be sold. Real estate is less liquid than stocks/ bonds

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16
Q

Calculable potential loss of investor

17
Q

Income tax term that refers to investments capable of shielding/ reducing an investors tax liability-

A

Tax shelter

18
Q

Investment math-

A

Used for income generating properties such as apartments, retail centers, multi- tenant office building etc

19
Q

Cap rate-

A

Measures amount of risk involved in the transaction

20
Q

Higher the cap rate- lower the_

A

Sales price should be

21
Q

Higher the cap rate, greater the _

22
Q

(4) steps involved w/ investment math-

A

1) estimate annual potential gross income
2) subtract appropriate allowance for vacancy/ collection losses to arrive at an effective gross income
3) deduct operating expenses
4) divide net operating income cap rate to determine market value

23
Q

Going concern value-

A

Value that ah existing business would have compared to a start- up business of the same type

24
Q

(4) methods of appraising a business-

A

1) comparable sales analysis
2) cost approach- how much would it cost to duplicate this business?
3) income capitalization analysis- how much income generates when compared to expenses?
4) liquidation analysis (in case of bankruptcy of current business) how much would business bring in emergency sales?

25
Q

(2) methods used in business accounting-

A

1) cash
2) accrual