Real Estate Miscellaneous Flashcards
What is Net Operating Income (NOI)?
Gross rents minus operating expenses such as property management, taxes, maintenance, wear/tear (cap-ex), vacancy at 5%, and insurance.
Given a gross rent of 1000 and operating expenses of 350, what is the NOI and Net Income if the debt is 150 for principle/interest?
NOI is 650 per month and Net Income is 400 per month.
What is Cap Rate and how is it calculated?
It is the ratio of Annual NOI to the purchase price plus costs. For example, if the annual NOI is 10,000 and the total costs are 100,000, the Cap Rate is 10%.
What does a lower market cap indicate?
It indicates higher NOI and lower expenses. The multiplier depends on the market you’re in and the quality of the property.
How is DSCR (Debt Service Coverage Ratio) calculated?
DSCR = Net Operating Income / Annual Debt Service. It should ideally be greater than 1.2 percent.
How do you calculate the Max purchase price for flips or BRRR strategy?
MPP = ARV x 70% - Rehab, where ARV is the After Repair Value.
What is the Actual COC (cash on cash) for flips and how is it calculated?
It’s the ratio of the annual income to the initial investment. For example, if you want a 10,000 profit on 100,000 costs, and you have an income of 100 per month, the COC return is 12%.
How is the COC used for project return for flips?
The goal is at least 10%. For instance, if you want a 10,000 profit on a 100,000 investment, the COC return should be 12%.
What are the important data points to check on Redfin for market analysis?
Time on market, list price to sale price percentage, inventory trends, buying down loan rate, and seller concessions. Refer to https://redfin.com/news/data-center and https://www.redfin.com/us-housing-market for more details.
When analyzing time on market, what does a longer duration indicate?
A longer time on market is better as it may lead to more concessions and a lower sale price.
How should you value any property?
Compare with the closest property within a 1/4 mile, with a size difference of +/- 200 sq ft. They should be of the same type, construction style, build generation (+/- 5 years), and have sold within the last 6 months.
What are the basic values to add or subtract for properties under 500K?
Bedroom: 10k, Bathroom: 10k, Pool: 10k, Carport: 5k, Garage: 10k.
What are the basic values to add or subtract for properties over 500K?
Bedroom: 20k, Bathroom: 10k, Pool: 20k, Garage: 20k, Carport: 10k.
How do property surroundings affect its value?
Siding/Backing high-density traffic: -10k, Fronting: -10k.
How is the ADU/basement square footage valued?
It’s not fully counted, but many get 50% of its value.
What are some general purchasing tips to consider?
Never buy on a busy street, without a reserve fund, sight unseen, without a home inspection, or the nicest house in the neighborhood.
What is the first step when considering building an ADU?
Call or visit the zoning office.
What should you check regarding parking when considering an ADU?
Check if additional parking is required.
What type of zoning is preferable for ADUs and why?
Look for single-family zoning that allows ADU because multifamily zoning has much higher regulations/standards.
Which is more cost-effective: attached or detached ADU?
Attached ADU is cheaper than detached. Attached costs around 100/sq, while detached is approximately 225/sq.
How can you create an ADU from a master bedroom?
You can build off the master bedroom if it has a separate bathroom, adding a hallway to the ADU.
What are some financing options for ADUs?
Home renovation loans, cash, private money, or borrowing from a 401k.
What size homes are suitable for ADU conversion?
Homes that are 3bed/2bath and >2000 sq or homes that are 2bed/2bath and 1500-2000 sq.
What factors should be considered for ADU conversion?
Proximity of a bathroom to the extra room, possibility to add a kitchen or another wall, and the feasibility of adding an external/another entrance.
What should you consider for a garage conversion to ADU?
Check if water/sewer/power line is on the same side as the garage, the size of the garage, the shared wall’s location, and the need for soundproofing or a vapor barrier.
What is the SB9 law related to ADUs?
The recent SB9 law makes it illegal for a city/municipality to not allow an ADU.
What should you research further for ADU and zoning laws?
Learn about ADU codes in LA county, differences between attached vs. detached ADUs, primary residence requirements, and parking standards from zoning laws for garage conversions.
